WHAT YOU NEED TO KNOW ABOUT INSURANCE AND HOW DOES IT WORK

 

INSURANCE – Is a contract in which an individual or entity pays an insurance company in exchange for financial protection or reimbursement of losses resulting from a covered event.

INSURANCE - Is a contract represented by a policy in which a policy holder receives financial protection or reimbursement against losses from an insurance company. The company pools clients risk to make payments more affordable for the insured. People have insurance for their life, car, healthcare, house and businesses.

Insurance policies hedge against financial loses resulting from accidents, injury or property damage insurance also helps cover costs associated with liability (legal responsibility) for damage or injury caused to a third party.

 INSURANCE - is a contract (policy) in which an insurer indemnifies another against losses from specific contingencies.

TYPES OF INSURANCE/POLICY

There are two broad categories of insurance.

1) General or non-life insurance(short term)

2) Life insurance(long term)

1. GENERAL INSURANCE

General insurance - is short term or annual and can be broadly categorized as personal and commercial in Kenya general insurance has 13 categories which include.

1. AVIATION INSURANCE

Is geared specifically to the operation of aircraft and the risks involved in aviation.

2. ENGINEERING INSURANCE

Offers protection against variety of risks associated with erection, resting and working machinery, plant or equipment for example contractors all risks, erection all risks, machinery breakdown, electronic equipment, deterioration of stock etc.

3. HOME (FIRE DOMESTIC) INSURANCE

Cover your house (building) and belongings against risk such as fire, theft, damage by extreme weather and other losses. The insurance can also be extended to cover domestic workers and owners liability.

4. FIRE INDUSTRIAL INSURANCE

Provides cover against loss or damage to property caused by fire, lighting, and explosion. This insurance covers assets such as buildings, plant and machinery, stock insurance, furniture fixtures and fittings, and office equipment.

5. PUBLIC LIABILITY INSURANCE

Covers the cost of personal injury or property damage claim by a third party as a result of your business activities.

6. MARINE INSURANCE

Covers the loss or damage of the ships, cargo, terminals, and any transport by which the property is transferred, acquired or held between the points of origin and final destination.

7. MOTOR PRIVATE/ COMMERCIAL INSURANCE

Covers loss or damage to the vehicle including legal liability to third parties in respect of death, injury or property damage arising from the use of motor vehicle.

Motor private cars vehicles that are used for private/domestic purposes while motor commercial covers vehicles used for business/commercial purposes.

8. PERSONAL ACCIDENT INSURANCE

Provides compensation in the event of injury, disability or death caused solely by accidental, external and visible events. This insurance can be also insurance can also be taken by a group of people such as employees.

9. THEFT INSURANCE

Covers loss or damage caused by the lawful taking of property. Theft insurance as a classification includes burglary insurance, money or cash in transit etc.

10. WORK INJURY BENEFITS (WIBA)

Provides employees with financial compensation when, by accident, they suffer injury, become disabled or die while at work. This is a requirement and is enforced by the Kenyan law.

11. MEDICAL INSURANCE

Covers medical expenses of the insured and their dependents. The common covers are out-patient and in-patient covers with dental and optical extension.

12. MICRO INSURANCE

Is packaging insurance for specific risks at affordable premium.

13. MISCELLANEOUS INSURANCE

Includes other types of insurance not covered in the above classes such as Agriculture, Golfers, Travel, Bonds, plate glass etc.

2. LIFE INSURANCE

Life insurance - is a long term contract between an individual(policy holder) or organisation and an insurance company.

In the event of death of the insured life insurance ensures that their loved ones continues to enjoy quality life. There are other events in life that may trigger payments from the life insurance cover including critical illness, terminal illness temporary or permanent disability, this depends on the terms of the contract. Other expenses such as funeral expenses may also be covered.

Life insurance policies can be for protection only, or they can combine both protection and investment. The investment element facilitates long-term savings and capital growth.

The main classes of life insurance are.

1. ORDINARY/INDIVIDUAL LIFE INSURANCE

Comprises all individual life policies categorized as either term assurance, whole life, endowment, or investment policies.

2. GROUP LIFE INSURANCE

Comprises group life insurance schemes mainly organised by employers on behalf of their employees; Group credit; Group mortgage schemes organised by financiers like banks; Co-operative societies; Microfinance institutions

3. PENSION/RETIREMENT PLANS

They are mainly offered by insurance companies to help individuals build up some money that can be used in retirement. Pension plans can also be taken by groups such as employees. The money is invested by the insurance company to generate a regular income paid to the retiree, and this income is what is referred to as pension.

4. ANNUITY

Is another way of planning for retirement in an Annuity, an individual pays a lamp sum premium to an insurance company, then provides a lifetime income to the individual from the premium.

5. INVESTMENT/UNIT LINKED CONTRACT PRODUCTS

Gives the policy holder both insurance and investment under a single integrated plan. The main objective is to facilitate the growth of capital invested by the client/policy holder.

6. FUNERAL INSURANCE

Covers funeral expenses upon demise of the insured or their dependents. It can be purchased as a stand-alone product or as part of another insurance product such as life insurance or medical insurance. IT IS RENEWED EVERY 12 MONTHS.

                    HOW INSURANCE WORKS

Insurance policies are available to any individual or business. The interested individuals or businesses can find an insurance company willing to insure them at a price, and it can be paid weekly, monthly, quarterly, half yearly, yearly, and single premium. For individuals, they can have life insurance and general insurance. For businesses, they can take insurance policies for field specific risks, for example, insurance that covers employees.

There are three components of insurance

1. Premium

2. Policy limit

3. Deductible

1. PREMIUM

A policy’s premium is price which is paid on a weekly, monthly, quarterly, half yearly and yearly. Often an insurer takes multiple factors into account to set premiums. These factors include

i) Age

ii) Sex

iii) Location

iv) Health status

v) Coverage level/amount of coverage

vi) Value of your house

vii) Claim history

2. POLICY LIMIT

Is the monetary amount that an insurance company will pay out in relation to a specific insurance policy claim.

3. DEDUCTIBLE

Is a specific amount you pay out of your pocket before the insurer pay claim. Deductible can apply per policy or claim, depending on the insurer and the type of policy.

LAW AND REGULATIONS

 Insurances industry in Kenya is reregulated by the Insurance Regulatory Authority (IRA) through the insurance Act and its attendant guidelines.

NOTE THAT:

Before you take any policy make sure that you have understood what is in that policy.

For more information just call/text/WhatsApp 0717753553/+25417753553