Life insurance is a contract between an insurance company and an insured (customer). The insured pays the premium and the insurer promises to pay a sum of money to an appointed beneficiary when the insured event occurs.
Life Insurance can either be for protection against the insured event (terminal or critical illness, death, disability among other risks) or it can be an investment where the aim is to save and grow your money.
Life insurance can either be for an individual or it can be taken out for a group of people such as employees, a chama, a SACCO, or a large extended family. The policy document in this case will bear the name of the group as the entity that is paying the premium. Group life is generally cheaper compared to individual policies.
There are three broad types of Life Insurance Covers:
- Term Assurance
This policy offers protection only for a particular period which is agreed upon by the insurance company and insured. It is the simplest and cheapest form of life insurance since it provides life cover only with no investment benefits. The insurance company will pay out the full sum assured if the insured passes away within the insurance period. There are no benefits that are payable if the insured is still alive when the policy matures.
- Whole Life
A whole life policy offers life-long protection to the insured. The insured selects how they would like to pay premiums. It could be throughout your life, you can chose to stop payment at a particular age (for example at 60), or you can chose to pay one single premium.
An endowment policy combines both protection and investment. The insurance company will pay out the full sum assured if the insured passes away within the insurance period. If the insured is still alive when the policy matures, the insurance company will pay out the sum assured and all the bonuses earned in the course of the policy.
This an insurance policy used to pay for funeral expenses. It covers the insured including their nuclear family i.e. spouse and children. It can also be extended to cover parents or siblings.
It can be purchased as a stand-alone product or as part of another insurance product.
The amount of premium payable determines the sum assured.
Upon demise of the insured or any of their immediate family members, the insurance company pays the claim to the appointed beneficiary within 48 hours of receiving notification and relevant documentation.
Personal Accident and Group Accident Insurance
A Personal accident insurance provides financial benefits to an individual if he/she is involved in an accident resulting in injuries or death. While, group personal accident insurance provides financial benefits to a group of people such as a family, employees, chamas, learning institutions, SMEs or any other group of people with common interest.
Drivers of motor vehicles are encouraged to take personal accident insurance since they are not covered under the motor insurance whether third party or comprehensive.
Medical insurance, also referred to as health insurance, covers the medical expenses incurred by the insured or their dependents. It can be taken by an individual or a group of people.
The policy can be out-patient (walk in and out of hospital) only or in-patient (admission) only. It can also have a combination of both in and out patient.
Does medical insurance cover all medical bills?
Each medical insurance is different in terms of the medical treatments it can cover. This is dependent on the type of cover and on the premium paid. It is therefore very important to first shop for a policy that meets your needs and then review the policy document together with your insurer to ensure you have clearly understood what is covered and what is not covered.
It is also important to understand the expenses that NHIF will pay for as these are excluded from the private medical insurance cover.
Most medical insurance policies can be extended to cover additional benefits such as optical and dental cover, congenital defects, maternity expenses, pre-existing conditions, chronic ailments, psychiatric conditions among others.
Most covers exclude cosmetic surgery or treatments, age related senility or insanity, family planning and treatments not administered by a registered medical practitioner.
Travel Insurance covers specific events during travel. Covered risks and exclusions vary significantly by policy type, insurer, and travel preferences. The risks typically covered include;
- Trip interruptions
- Cancellations (entire trip or a section of the trip)
- Lost or delayed baggage
- Carrier or service provider failures
- Emergency evacuations (due to physical threats and medical emergencies)
- Theft and other crimes
- Medical treatment for injuries caused due to travel
- Accidental death (including transportation of remains)
What is not covered?
- Natural disasters
- Severe weather
- Crimes committed against you or a member of your traveling party
- Lost travel documents or identification papers
- Civil unrest
- Unannounced strikes that render your carrier unable to operate
This policy insures the home. It is also referred to as Domestic Package insurance. It combines coverage for the home that is, the building and household contents as well as domestic workers against death or injury while in the course of employment. The policy also covers the homeowners or occupiers against lawsuits for injury or property damage caused to other people (third parties).
Home insurance can be taken out by a tenant, a home owner or a landlord.
What does Home insurance cover?
Home insurance policy has five (5) sections, A to E, each covering different risks as broken down below;
- Section A – Cover for the structure of your home or building
- Section B – Cover for your personal belongings or contents such as electronics, jewelry, art, clothes, furniture etc
- Section C – Cover for items you move with outside the house such as mobile phones, watches, IPads, laptops, rings, cameras, spectacles. This section is also referred to as All Risks
- Section D – Liability protection, this covers domestic workers for injury or death while undertaking domestic work.
- Sections E and F – Coverage of owners and occupiers against lawsuits for injury or property damage caused to other people.
You can select any of the Sections / risks you want to protect against. However, the cover must have Section A or B in it.
Why is it important to take an inventory before purchasing Home Insurance?
Before you purchase home insurance, you will be required to provide an inventory. A home inventory is a list of all the things in your house including electronics, furniture, kitchen equipment and jewelry. It is important to record the serial numbers of the major appliances, keep the receipts and user manuals safely.
Having an up-to-date home inventory will help you insure the correct value of property and get your insurance claim settled faster.
How often should I review my policy?
Home insurance is an annual cover. However, if in the course of the year you make improvements to your home such as fire and burglar alarm systems, upgraded plumbing or electrical system or if you make a major purchase. Inform your insurance company about the improvements or changes.
You may need additional cover if there is a change in the value of your home or its contents.
Car or motor insurance is mandatory in Kenya. You can have either third party insurance or comprehensive insurance.
Third party insurance covers the costs of all other damages (third parties) including other vehicles, persons, but does not cover you and your vehicle.
Comprehensive insurance covers both third parties and your vehicle.
It is important to note that the driver of the vehicle is not covered in both types of insurance. Drivers are encouraged to get Personal Accident Insurance either as an optional benefit on their motor insurance or as a separate policy.
Motor insurance in Kenya is very competitive and it is therefore wise to shop around for the best deal that will meet your needs.
You will be required to value your vehicle to determine the premium that you will pay. Most insurance companies cover the cost of valuation.
Remember to ask for and read your policy document.
Pension is a form of insurance that helps one plan for life after retirement and protects against age old poverty.
Pension can be defined as a regular payment to an individual during retirement from a pension scheme towards which that individual or their employer had contributed during their working life.
- Why should I plan for retirement?
You may be young and energetic today, but with time, you will slow down and retire and thanks to advances in medicine, we now live longer.
Living expenses however do not retire. You will still need to eat, go to hospital, pay for utilities (water, electricity, cooking gas), medical bills, housing and others.
Planning for retirement helps us have an income that will cater for these expenses and ensure that the quality of life in old age is still as good as when one was active.
Planning for retirement is also important given today’s economic realities where it will be difficult to rely on other people for your daily needs. The family unit is weakening and the traditional notion of parents relying on their children is fading.