Why Life Insurance is Best for Asset Building

Life insurance is a contract between a policyholder and an insurance company in which an individual pays a regular premium and the insurance company pays a benefit in the event of the death of certain dependents of the individual. .File Photo | Shutterstock

Our workforce patterns are changing as seniors from our Generation Z cohort join the workforce.

They may not be considering financial investments because they do not have significant financial responsibilities, but should instead be thinking about wealth creation or wealth protection.

However, given their limited disposable income, this group would be wise to turn their attention to wealth conservation rather than wealth production.

While the alternatives are endless and include buying stocks, bonds, treasury bills, money market funds, and other types of investments, preserving wealth protects our loved ones from financial loss. increase. This is where life insurance comes into play.

Life insurance is a contract between a policyholder and an insurance company in which an individual pays a regular premium and the insurance company pays a benefit in the event of the death of certain dependents of the individual. .

This is especially important for Gen Z individuals who have no real assets or money to leave behind. A death benefit can be used to pay for individual dependent expenses.

There are three types of life insurance in Kenya: term insurance, whole life insurance and endowment insurance. Term life insurance is the most basic and least expensive type.

We offer warranties for a period of time, often 10, 20 or 30 years. Whole life insurance covers a person’s lifetime and accumulates cash value over time.

read: Changes in awareness of insurance

Endowment insurance is a combination of term life insurance and savings that pays benefits to an individual’s dependents if the individual dies or to the individual when the policy period expires.

Life insurance can therefore be obtained from a variety of sources, including insurance companies and banks. Different insurance companies offer comparable policies. The main variation is how attractively its features are tailored.

Plans start at Sh900/year for final cost insurance and Sh1,000/month for endowment insurance.

Why Life Insurance?

Although Kenya has a population of over 50 million, it has a relatively low industry penetration rate of just 1.3%. This is a great opportunity to invest. There are many benefits to having life insurance.

First and foremost, life insurance provides financial protection in the event of an untimely death of a loved one. Lump-sum payments can be provided to beneficiaries to help with expenses such as funeral expenses, outstanding debts, and living expenses.

Second, life insurance can be used to save money. For example, whole life insurance can accumulate cash value over time that can be used for future expenses or retirement.

Additionally, donations allow you to save for a specific purpose, such as starting a business, and use a portion of your death benefit for that purpose.

read: How technology is disrupting Kenya’s insurance industry

Finally, life insurance in Kenya offers tax benefits. Life insurance premiums are tax-deductible and death benefits are usually tax-free, allowing beneficiaries to keep more of the money they receive.

In a nutshell, understanding the price of life insurance is important.

Premiums are determined by characteristics such as age, health, and amount of coverage. Other elements of the policy are important, such as exclusions, limitations and covenants. For example, some policies may not cover death caused by certain activities or circumstances.

Before purchasing life insurance in Kenya, Gen Z should research the above aspects to ensure they are making the best choice for their requirements and circumstances.

Mr. Sanaipei is a Billing and Underwriting Manager.sana[email protected]