Pure Protection Life Insurance refers to a life insurance policy that provides a payout in the event of death, critical illness and/or disability. Unlike endowment life insurance such as Education Insurance, pure protection policies do not come with a surrender value or savings component that the insured can receive at some point during the term of the policy.
In Kenya, there are three main types of pure protection life insurance options; Whole Life Insurance, Term Life Insurance and Group Life Insurance.
As the name implies, a whole life insurance policy covers the insured for the whole of their life. The following are some common features of whole life insurance policies in Kenya.
- Provides a payout to beneficiaries in the event of natural and accidental death.
- Provides critical illness insurance where a payout is made to the insured in the event of a critical illness such as cancer.
- Provides a payout or premium waiver to the insured in the event of a permanent or total disability.
- Some companies provide the option of adding a spouse in the same policy i.e. joint cover.
- Some companies pay annual bonuses throughout the lifetime of the policy.
Depending on the company and the product design, there are three premium payment modes possible as follows:
- For the insured’s entire life.
- For a fixed term e.g. 10, 15, 20 years
- Up to a specified age e.g. up to age 55, 60, 65
Typically, option 1 above usually offers the cheapest premium. For option 2 and 3 above, the insured would pay premiums for a fixed period and would then remain covered for the rest of their lives.
In addition to the standard Whole Life plan, funeral insurance plans are also emerging as a popular type of whole life insurance in Kenya.
Advantages of Whole Life Insurance
- Whole life insurance helps the insured create an immediate estate for the family in the event of his demise. This allows the family to maintain their standard of living without having to sell off assets or conduct fundraising.
- Where critical illness coverage is included in a whole life insurance plan, the insured can use the payout to offset medical bills in the event of diagnosis of a critical illness.
- Where permanent disability coverage is included, the insured receives a payout that offsets the financial strain that would otherwise exist due to the insured’s inability to engage in gainful employment.
Term Life insurance is another common type of pure protection life insurance. With term life, the insured has protection in the event of death. Because the plan typically only offers protection in the event of death, it is the cheapest form of life insurance one can acquire.
In Kenya, the most common type of Term Life insurance in Kenya include Credit Life and Mortgage Protection policies. These pay off a bank loan or mortgage respectively, in the event of the insured’s death. If you have ever taken out a bank loan or mortgage, then you have probably been required to complete an insurance form for term life insurance. The premiums are usually loaded onto the loan repayment amount.
Credit Life and Mortgage Protection policies ensure the bank doesn’t come after your assets in the event of your demise.
A Group Life insurance plan is a pure protection life insurance plan taken out by an employer for the benefit of the employees. The plan covers employees in the event of death. However, some insurance companies also offer extra coverage for critical illness, disability, funeral costs and even retrenchment at an extra premium.
Would like to find out more about pure protection life insurance policies? Do not hesitate to contact us.