Insurance and business consultant with over 20 years experience.

Insurance and business consultant with over 20 years experience.

Frequently Asked Questions about Life Insurance in Kenya

The following are some life insurance common questions posed by prospective customers in Kenya. If you are in the market for a life insurance or education insurance policy, see below for answers that will help you make an informed decision.

How much life insurance do I need?

Determining your life insurance needs requires a close examination of your current and future financial obligations as well as the resources at your family’s disposal. Some of the things you need to consider to come up with an accurate figure include:

  • Funeral costs
  • Taxes
  • Food
  • Shelter
  • Clothing
  • Utilities
  • Mortgage payments
  • Future obligations like school fees

To meet the above obligations, your surviving family will draw on existing resources such as your spouse’s income, existing savings and investments, other income-generating assets, and life insurance you held (this could be personal life insurance or insurance taken out by your employer)

The estimated life insurance coverage that you need will be the difference between current and financial obligations, and what your surviving family can muster. This may sound complicated which is why you need a qualified insurance guru to help you figure out how much life insurance you need. If you are not ready to meet with an insurance agent and just want a preliminary sense of your life insurance needs, please complete our life insurance needs assessment form and we will get back to you with a rough estimate of how much life insurance you need to protect your family.

What if I am unable to pay the premiums after taking the policy?

The main reason that leads to people stop paying for their policy is a change in financial circumstances occasioned by a job loss or adverse business event, a critical illness or permanent disability.

Insurance companies will typically give you a one-month grace period should you miss a premium payment. After the lapse period passes, then the policy lapses. However, you can always pay the arrears and reinstate the policy after it has lapsed and continue enjoying the policy benefits.

Depending on how long you have paid for your policy, you could lose all your money or have the option to convert your policy into a paid-up policy, or surrender the policy and receive the surrender value.

In most cases, a policy can only be converted to a paid-up policy or have a surrender value after 36 monthly premium instalments (or 3 years) have been paid.

In a paid-up policy, the sum assured is reduced to the equivalent of premiums already and further premiums are no longer due. The policy then remains active until its maturity date.

Should I take an Education Insurance Policy if I don’t have a child?

Yes, you can. You need not wait until you have a child. Most insurance companies will allow you to do so.

In the event that you have several children, you can opt to take up different policies or simply fill one form since the payment is usually made to you (the parent) and not to an institution or a third party.

Can a life insurance policy be used as a security for a loan?

Yes, a life insurance policy may be ceded as a security subject to the cash surrender value of the policy at the time.

It is also possible to get a policy loan for the amount of surrender value a policy has accumulated.

What are exclusions in a life insurance policy?

Exclusions are events that are not covered by an insurance company. Typical life insurance exclusions in the Kenyan insurance industry include:

  • Suicide/attempted suicide in the first 2 years.
  • Claims arising from criminal activities e.g. death while committing a crime.
  • Death as a result of the abuse of alcohol and related substances.
  • Death and permanent disablement arising out of an act of war, military action, terrorism, riots, civil commotion.
  • Medical conditions not disclosed prior to issuance of policy. Failure to disclose an existing medical condition on the insurance application form amounts to a failure to disclose a material fact.

 

 

 

 

Life Insurance in Kenya

Life Insurance, also known as Life Assurance, is a type of insurance policy that provides a monetary benefit (the sum assured) to a named beneficiary upon the demise of the life that has been insured. The policy may be for a specified duration or the entire life of the person insured by the policy.

Important Terminologies in Life Insurance

Below is a definition of some important terms that will help you better understand Life Insurance.

Insured: The person whose life is covered by the policy

Sum insured/assured: The amount of life insurance coverage in Kenya Shillings that the insured has purchased from an insurance company.

Policy term: The duration of the policy. It could be a fixed duration e.g. 20 years, up to a certain age, or for the entire life of the insured person.

Premium: The amount of money paid periodically to the insurance company to keep the policy in force. This amount may be paid monthly, quarterly, semi-annually or annually.

Life Insurance policy document: The actual physical document that contains all the terms, conditions and details of the contract between the insured and the insurance company.

Partial Maturity: Some types of life insurance policies pay a sum to the insured person before the end of the policy term. This sum is known as a partial maturity.

Beneficiary: The named person in the policy document who receives the benefit payment upon the demise of the insured person.

Bonuses: Some types of life insurance policies accrue bonuses that are paid out upon maturity of the policy. These bonuses may be guaranteed or discretionary based on company performance.

Surrender value: Some types of life insurance policy have a surrender value. This is usually after successful payment of the premium for at least three years. The insured can “surrender” the policy to the insurance company and receive this value if they can no longer afford to pay the premium or no longer want the policy.

Type of Life Insurance Policies

There are three main types of ordinary life insurance policies in Kenya.

Endowment Life

These are undoubtedly the most common life insurance policies in Kenya. Endowment policies are for a fixed term e.g. 20 years. Most endowment policies pay out partial maturities at regular intervals and a final maturity upon the expiry of the policy term to the insured. In the event of the demise of the insured before the expiry of the policy term, the named beneficiary gets paid the sum assured. Endowment policies accrue bonuses and have a surrender value after three years of premium payment. The example of an endowment life policy in Kenya is an Education Policy.

Whole Life

Whole life insurance policies in Kenyan are usually up to a certain age e.g Whole Life to age 65 or alternatively, the client pays the premium for a fixed number of years and is then covered for the rest of their lives. The sum assured plus any accrued bonuses are paid to the beneficiary upon the demise of the insured person. Endowment policies accrue bonuses and have a surrender value after three years of premium payment.

Term Life

Term life policies are pure life policies with no bonuses, surrender value or maturity payments. They offer a straight death benefit upon the demise of the life assured. The best example of term life policies in Kenya is credit life policies which pay the loan balance in the event a bank or mortgage customer passes away. The premium payment for credit life policies is usually bundled into the loan repayment amount.

Supplementary Coverage/Riders

Life insurance policies in Kenya are often sold with supplementary coverage. Some of the most common types of supplementary coverage include:

  1. Accidental Death Rider – Additional coverage that pays an additional amount, typically 150 – 200% of the sum assured, upon the demise of the insured person through accidental death (as opposed to natural causes).
  2. Critical Illness Rider – An additional sum, typically a stated percentage of the sum assured, paid to the insured person upon diagnosis of a critical illness specified in the policy.
  3. Permanent and Total Disability Rider – Additional coverage that pays an additional amount, typically 150 – 200% of the sum assured, upon the permanent and total disability of the insured person.
  4. Waiver of Premium Rider – A feature of the policy that waives future premium payments upon the occurrence of a named event e.g permanent and total disability.

Do You Need a Life Insurance Policy?

To answer this question, you need to ask answer a few key questions:

  1. Do you have dependents?
  2. Do you have assets?
  3. Would the future of my dependents be secure in the event of my demise or would they need to cannibalize the assets I leave behind to get by?
  4. Are you interested in a forced savings scheme to fund school fees, a wedding, land purchase, retirement or anything you desire?

If you have answered in the affirmative to at least three out of four questions above, then you should definitely consider purchasing a life insurance policy.

How Much Does it Cost?

The insurance premium you pay will depend on the following factors:

  1. Your age.
  2. Your general health status. Medical examinations are typically required for sums assured greater than Kshs 5 million.
  3. The sum insured/assured i.e. the total coverage needed.

To purchase the policy all you will need is to complete an application form and the insurance agent will advise you on the premium payable. Once the insurance company accepts the policy, you will be issued with a policy document.

If you are interested in purchasing a life insurance policy kindly request a quote or get in touch with us via our telephone number or contact form.

Education Insurance Policy

Due to the high cost of quality education, education insurance policies are quite popular in Kenya. An education insurance policy is a type of life insurance policy that is specifically designed to provide regular payments at some point in future that can be used to settle school fees.

How Does it Work?

First, you need to select a sum assured or the total benefit amount. Next, you need to choose a policy term, that is, the total duration of the policy. Once you have done this, your insurance agent will compute the premium. The premium is paid on a monthly, quarterly, half-yearly or annual. The policy will typically start paying you a sum annually, ideally suited for secondary school or university costs, in the last few years of the policy. The number of payments you receive varies from company to company but the industry average is 4 to 7 payments in the final years of the policy.

Example

To best understand this, see the example below from a leading education insurance life insurer in Kenya.
Plan term: 20 years

Sum assured: 1 million

Year % Payout of Sum Assured
14 10% (100,000)
15 15% (150,000)
16 20% (200,000)
17 25% (250,000)
18 30% (300,000)
19 40% (400,000)
20 100% (1,000,000)

As seen in the above illustration, this is a 20-year education insurance policy that pays instalments starting with 10% (Kshs 100, 000) of the sum assured in the 14th year. This increases gradually every year as shown in the table above. In the last year (maturity), the plan pays 100% (Kshs 1, 000, 000) of the sum assured. In total, the plan pays out 240% of the sum assured.

Other benefits of the example education insurance policy above include:

  1. In the event of the death of the insured person, the insurance company pays 100% of the insured amount to a beneficiary of your choice. The company then waives the insurance premium and pays all the original benefits to your beneficiary when they fall due. 
  2. In the event of accidental death, the insurance company pays 200% of the sum assured to your beneficiary. The company also waives the premium payable and pays all the original benefits to your beneficiary when they fall due.
  3. Upon diagnosis of a critical illness, the insurance company pays 50% of the sum assured, and then waives your remaining monthly payments and pays all the original benefits to you or your beneficiary when they become due.
  4. In the event you become permanently disabled due to an accident or illness, the insurance company waives all remaining premium payments and pays all the original benefits to you or your beneficiary when they become due.

Do You Need an Education Insurance Policy?

To find out if you need an education insurance policy, ponder over the following:

  1. Do you want a forced savings plan that ensures education funds are not diverted to anything else?
  2. What would happen to the education of your children in the event of your demise? Have you set aside a nest egg hidden away to cater for the future education needs of your children?

If you want a forced savings plan and you don’t have a stash of money you have hidden away somewhere to fund your child(rens) education, then you definitely need an education insurance policy.

How Much Does an Education Insurance Policy Cost?

The cost of an education insurance policy will depend on several factors, namely:

  1. The sum assured or total benefit amount.
  2. The term of the education insurance policy, that is, the total duration.
  3. Your general health status.

What are the Requirements?

You simply need to complete a form and start paying the insurance premium. Medical examinations are not required by most insurance companies unless the sum assured is greater than 5 million Kenya Shillings.

To find out more about education insurance policies, request a no-obligation quote or contact us via our contact page or tap the call icon if you are viewing this page on a mobile device.