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Are You An Informed Insurance Consumer?

Posted on 2016-09-28
Are You An Informed Insurance Consumer?

I will tell you about the key aspects of insurance which you need to know before buying insurance. You can avoid many common mistakes people make while shopping around for an appropriate insurance cover. Our aim at is to help consumers understand what they are buying.

Let’s sample the insurance industry

There are 49 insurance and 3 reinsurance companies in Kenya. Some of the insurance companies only sell general insurance while others sell life insurance only. Others sell both life and general insurance business, many of the top insurance companies in Kenya feature in all the major lines of business, life, general and life.

Insurance can also be bought through insurance agents or brokers and directly through the insurers themselves at the head offices, branches country wide and even online. Jubilee insurance is the undisputed leader in digital, selling most of their retail products online. With the introduction of price comparison websites, insurance can now be compared and sold online in Kenya and East Africa. Such comparison/aggregator websites give consumers an opportunity to compare quotes from various insurance companies. These platforms represent the interests of clients, ensuring the public gets the car, health, life covers at the best prices. All players in the insurance industry are licensed to conduct insurance business.

How does insurance operate?

Insurance operates on the basic understanding that loses and misfortunes occur any time either to us or our businesses. Insurance is informed by the wisdom that it is better to be prepared for setbacks than to regret when losses strike and meet us unprepared.

Those of us who manage insurance know that only a few out of the many insureds exposed to risk will suffer losses. This is why only some cars get stolen in any one year, a few houses catch fire and a few people die in any one period. The premiums paid by the many are used to compensate the unfortunate few who suffer losses. The irony is that no one knows who will suffer a loss or misfortune.

Why do you need to buy insurance?

You need to buy insurance because, when incidents such as fire, theft, motor accidents, sickness and untimely death occur those affected may not be prepared for the financial consequences that follow. They may therefore resort to fundraising or borrowing money from friends and relatives. Unfortunately, such friends and relatives may not replace the financial losses already suffered. In extreme cases, precious family assets such as land, motor vehicle or cattle are sold to offset the cost of such misfortune. This is often done at throwaway prices because of the emergency situation. The purpose of insurance is to ensure that funds are always available in case of such misfortunes.

What are some of the benefits of Insurance?

  1. Family Protection

    A life insurance policy or annuity pays a sum of money to the family in the event of untimely death of the breadwinner. In some policies, the payment of sum insured is done in the event of permanent disability or critical illness. In Kenya, it is common to start fund raisings upon the death of the breadwinner, a battle for the deceased’s property and assets shortly ensues. A life policy with a clearly registered beneficiary can clearly solve this common scenario. Following the untimely death of the breadwinner, children are most affected, their provisions and education can be completely and entirely disrupted. Luckily, many Kenyan parents have realized the benefit of a child education plan for their children’s schools fees, ensuring the continuity of their children’s education even in the unfortunate event of their passing. Every parent should take time to find the best education policy from all the providers in Kenya, guaranteeing the success of their children.

  2. Peace of Mind

    When you buy insurance, you have peace of mind because should you lose your possessions, get sick or be involved in an accident etc the insurance company will meet the resulting financial burden to the extent agreed. A vehicle is one of the most treasured assets in Kenya, therefore having a comprehensive insurance for motor vehicles is absolutely necessary. Hence, insurance creates confidence and eliminates worries associated with uncertainties.

  3. Saving

    Saving applies to life policies only. A life policy is a long term contract in which the policyholder has to pay a fixed amount of money throughout the policy duration. This creates discipline and encourages the habit of long term saving thus helps in creating wealth for future investments.

  4. Financial Guarantee

    A life policy can be used as a security/guarantee when borrowing money either from a bank or from a bank or from the insurance company itself.

  5. Investment vehicle

    Life insurance can help a person realize some major goals in life. The goals include buying or building a house, educating children and retiring into financial freedom. Many Kenyans find it difficult to accumulate savings, we are prone to erratic spending, a weekend of partying, an unplanned holiday and luxurious gifts.

  6. Tax Benefits

    All life insurance policies attract a tax relief of 15% on the premium paid subject to a maximum of Ksh. 5,000 per month or Ksh. 60,000 per year. Using this KRA salary PAYE calculator, you can calculator how much tax relief you can enjoy on your monthly or annual premiums when you take a life policy.

What should you do before buying insurance?

Before buying an insurance policy, you should ensure that you have understood your insurance needs that the policy will meet. Different policies pay under different circumstances for example;

  • For a life policy, a claim is payable upon partial/full maturity or early death whichever comes early.
  • For a comprehensive motor vehicle policy, a claim is payable when the vehicle is involved in an accident, is stolen or has caught fire etc.

In order to understand the benefits of a policy, you should get at least three different quotes for your insurance from different providers. Next, you should seek clarification from the agent, insurance broker or insurance company.

Insurance contracts are contracts of utmost good faith. Because of this, the buyer of insurance will be asked some questions when making proposals. It is Important that you as the proposer answer such questions truthfully to provide the insurer with the same information and understanding about the risk as the proposer.

You should also ensure that you pay the premium as advised. You as the policy holder must ensure that you are issued with a policy document by the insurance company. It is also very important that you read and understand the policy document or enquire on any issues that you don’t understand.

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