A step by step guide to life insurance in Kenya, how when why and where to purchase life insurance in Kenya
Life insurance is the foundation of financial security for you and
your family. It protects your financial resources against the
uncertainities of life so that you can plan for the future. Choosing a
life insurance product is a very important decision, but it can be
complicated. As with any major purchase, it is important that you
understand your needs and the choices and options available to you.
1.Why You Need To Buy Life Insurance
There are about 7 reasons on why you need to buy life insurance policy
for you and your family.
1. To ensure that your immediate family has cash and income after your
demise so that they can easily pay bills, taxes and other obligations.
2. To ensure that your immediate family members are able to maintain
their standard of living upon your demise.
3. For your children to have money for education.
4. For you to have a savings plan for the future so that when you
retire, you have a constant source of income.
5. To ensure that you have extra income when your earnings are reduced
due to a serious illness or accident.
6. To provide you as the policy holder with peace of mind when cover
is adequate.
7. Life insurance is a tool for mobilizing domestic savings ensures
that the economy is supplied with long term funds for investment and
development. These are chanelled to the economy through various
insurance companies' investment.
2. How To Purchase a Life Insurance Policy in Kenya
You can choose to purchase a life insurance policy directly from a
life insurance company or through a life insurance agent.
You need to be careful when choosing a cover to suit your needs.
Always take time to discuss with the insurance company or its
intermediary about the policy that you are thinking of buying.
Start by evaluating your family's needs. Gather all your personal
financial information and estimate what your family will need after
you are gone.
3. Which Policy Should you Buy?
You must choose the type of policy that best suits your personal circumstances.
You should understand the scope of cover provided under the policy,
the various terms and conditions and the cost of the insurance cover.
You should also be aware of what will happen if you want to transfer
from one policy to another.
4. The uses of life insurance products
Life insurance most commonly provides financial protection in the
event of death or disability.
Life insurance products also provide an investment mechanism as the
premium paid represent significant savings.
5. Making changes in your policy
Sometimes due to changes in circumstances, it may be necessary to make
some changes in the policy document like names of beneficiaries.
Changes can be made by completing standard forms and sending the
policy documents to the insurance company.
After making the changes you should let your nominee know about your
life insurance policy, any changes that you have made to the policy
and where you keep your documents.
You should have a contigent (or secondary) nominee in case the main
nominee passes away before you. In addition make sure your life
insurance company is informed of any changes in that address.
6. Why should not cancel your policy
Buying a life policy is a long term commitment. If you cancel your
policy, you will not receive the total amount of premiums that you
have paid to date, as the surrender value (value of your policy when
you terminate it) is usually less than what you have paid.
If someone asks you to cancel and then buy another policy, discuss
these matters with your existing life insurance company first before
doing anything. It is not in your best interest to replace a policy
because:-
You may have to pay a higher premium since you are older.
Your cash value will build up slowly, as your new premium must pay for
the initial cost of writing the life insurance policy a second time.
The 2 year period of contestability will begin again. Similarly, the
suicide clause also allows for the policy to start afresh.
The existing policy may have more favorable provisions than the new
policy in areas such as settlement options and disability benefits.
Your present life insurance company can often make the changes you
want at a lower cost to you.
7. The common type of life insurance claims in Kenya
1. Maturity claims
2. Death claims
3. Surrender value claims
4. Policy loans
5. Disability claims
6. Partial maturity claims
8. The tax advantage of buying a life insurance policy
A person who has a life insurance policy receives a tax relief of 15
per cent of the premium subject to a maximum of Ksh 5,000 per month or
Ksh 60,000 per year. The rates of tax are reviewed from time to time
and the tax relief at any one time can authoritatively be confirmed
from Kenya Revenue Authority.
The amount of tax relief per month for retirement benefits schemes is
up to a maximum of Ksh 20,000 per month or Ksh 240,000 per annum.
The benefits payable under life insurance are tax exempt.
Find life insurers at www.akinsure.com
