Life insurance is a cover where the insurance company promises to pay a lump sum to the insured in case of death or when the policy matures. It has other benefits like waiver of premium in event of critical illness or permanent disability.
Life insurance gives you peace of mind knowing that your family will be financially covered in case of any unfortunate eventuality. What’s more, your children’s education will be guaranteed if you have a life insurance education policy.
Types of Life insurance policies
There are two major categories of life insurance policies;
- Whole life insurance
- Policies with living benefits/ maturity payout or Endowment Policies
1.Whole life Insurance
This is a life insurance policy only payable upon death of the policy holder. This protect your family financially upon the demise of the bread winner. The beneficiaries are paid a lump sum when the policy holder passes on. This is the most affordable type of life insurance and the policy period can range from 1 year to one’s lifetime. The premiums is mostly paid on an annual basis.
2.Investment policies with life insurance and living benefits
This kind of policy combines an aspect of investment (saving) and life insurance. The cover is taken for specified number of years. If a policy holder dies before the end of the policy term, a lump sum is paid to the beneficiary (ies) and if one lives to the maturity of the policy, partial maturity bonuses and a lump sum is paid to the policy holder.
You can use this type of policy to finance a future project or secure the education of your children. A premium either monthly, quarterly or annual is paid throughout the term of the policy. The policy term ranges from 5 to 20 years.
Cover under life insurance
Since whole life insurance is majorly only payable at death, the discussion below will be based on the investment policies with living benefits.
Other than the partial or final maturity payments that a policy offers, a life insurance policy often have riders that enhance the cover benefits. Riders are additional benefits provided in a life insurance policy, most riders come at an additional cost. The various riders are discussed below;
- Waiver of premium- This rider provides a waiver of future premiums if the policy holder is diagnosed with a critical illness or is permanently disabled.
- Disability cover- This rider pays a lump sum amount if the policyholder in case he/she is partially or totally disabled due to an accident or a disease and then future premium is waived till maturity of the policy.
- Accidental death- This rider pays a lump sum amount in event of the death of policy holder due to an accident. This means that the family gets double the policy amount and future premium is waived to the maturity of the policy.
- Critical illness- This rider pays a lump sum amount in case the policy holder is diagnosed with a critical illness since treating such illnesses can be financially draining. The future premium is then waived till maturity of the policy.
What determines premium in a life insurance cover?
- Age- Life insurance is cheaper when one is younger, premiums increases with advancement of age.
- Sum assured- This refers to the amount of cover that the policy holder opts for, the higher the sum assured the higher the premium.
- Policy term- The longer the policy term the cheaper the premiums and vice versa.
- Riders included in the life insurance cover- As discussed above, riders come at an extra cost. We will advise you on riders that are crucial for a comprehensive coverage.
- Present health condition and history- A person with pre-existing illnesses or one whose family has a history of illnesses running in the family will attract a higher premium.
- Occupation- Individuals working in high risks jobs may attract higher premiums. For example- military, professional sportsmen. Some insurance companies may decline to cover such high risk individuals.
Education policy insurance discussed Contact Us
- Education policies are the most common types of individual life insurance covers in Kenya. The education of a child/ dependent stretches over a long period of time, mostly from the age of 3 to around 24 years. This requires one to plan adequately for the education of their loved ones. An education policy comes in handy to help one achieve this goal by saving a small amount of money (premium) for a specified period time. This gives you a guarantee that whether you are alive or not, your children’s’ education will not be disrupted.What you need to know about an education policy;
- The earlier you start the better, it is advisable to take an education policy as soon as the child is born, preferably within the first month. This will ensure that you save for a longer period and pay lesser premiums.
- Opt for an adequate cover amount- choose a sum assured that will adequately cater for the education of your children. It is also advisable to pick one that you will be able to afford since premium is paid for a long period of time.
- Education policies are majorly designed to start paying partial maturities some years before the maturity of the policy. For example, you can have a cover paying 15% or 20% of the sum assured annually five years before maturity, then a higher percentage paid as lump sum upon maturity of the policy.
- Education policies like other life policies, should not be terminated mid- term since the policy holder will be penalized for this. In case a policy is terminated before 3 years, the policy holder loses all his savings and if above 3 years, he/ she can only access a portion of his savings which is referred to as surrender value.
Looking for the Best Life Insurance Cover in Kenya? We are here to help you?
The dedicated team of life insurance specialists at Earnest Financial and Insurance Consultants is ready to help you find the right life insurance or education policy. We will discuss with you to find a plan that suits your needs, goals, and budget. Our goal is to help you grow and protect what matters to you by helping you find the best life insurance cover. Contact us today via the contact form, email or WhatsApp and we shall help you understand and chose the best life insurance policy.