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What is life insurance?
Life insurance is a contract between an individual or organization (insurance policy holder) and an insurer (insurance company). The policyholder pays the policy premium and the insurer promises to pay a designated beneficiary a sum of money upon the occurrence of an insured event. Depending on the contract, events such as terminal or critical illness may also trigger payment.
The core benefit of life insurance is that the financial interests of one’s family e.g. children’s education, remain protected from circumstances such as loss of income due to critical illness or death of the policyholder.

Why do I need life insurance?
Life Insurance not only provides for financial support in the event of untimely death or critical/terminal illness, but it also acts as a long term investment. With life insurance, you can still meet your goals such your children's education, their marriage, building your dream home or planning a relaxed retired life. This is all dependent on your life stage and risk appetite.
There are various types of life insurance policies that offer various benefits to the policy holder. They are explained below;
What are the common types of Life insurance?

This type of policy offers protection for a limited period. It is the simplest and cheapest form of life insurance since it only provides life cover with no investment benefits. The insurance company pays out the full sum assured if the policyholder passes away within the insurance period. No benefits are payable to the policy holder if they are still alive at the time of maturity of the policy.

 

An endowment policy combines both protection and investments. The insurance company pays out the full sum assured if the policyholder passes away within the insurance period. Upon maturity of the policy, or at the end of the insurance period, the maturity benefits are paid out including all the bonuses earned in the course of the policy to the policy holder.

A whole life policy offers life-long protection and premiums are paid either throughout your life, as a single premium or ceases at a given age e.g. age 60.

In unit linked policies part of the premium is used to purchase life protection and the rest is used to purchase units in an investment fund managed by the insurance company. The price of the units is based on the net asset value of the fund at the time of purchase. Return on the policy is linked to the investment performance of the managed fund.

This policy is meant to cater for funeral expenses of a policyholder or their family members in the event of their demise. The benefits are payable within forty eight (48) hours after notification.

Life Insurance Classes
Life insurance has three major classes namely: Group Life Insurance, Individual Life Insurance and Pension Plans/Retirement Benefits schemes.

1. GROUP LIFE INSURANCE

What is Group Life Assurance Cover?

Group Life Insurance is a product often undertaken by an organization for its employees. The policy document is in the name of the employer who also pays the premium to the insurance company. This type of insurance is also undertaken by other organized groups such as Chamas and SACCOs etc
Group life insurance provides for lump sum payments in the event that an employee dies while still in the service of the organization. This coverage will provide a benefit to the beneficiaries (next of kin) if the covered individual dies during the defined covered period.
As with other types of group benefits, group life insurance is cheaper than individual policies and hence why many organizations take it.
What are the benefits to employers?

What are the benefits to employees?

2. INDIVIDUAL LIFE ASSURANCE
Individual life insurance policies are those policies that are taken out by individuals in a bid to protect their dependents in the event of their demise or illness.
Individual Life insurance policies normally comprise the following:-

2. PENSION PLANS / RETIREMENT BENEFITS SCHEMES
What is a Pension Plan or a Retirement Benefits Scheme?
Pension Plans (also referred to as retirement plans) are offered by insurance companies and fund managers to help individuals build a retirement fund. Upon maturity, this fund is invested for generating a regular income stream, which is referred to as pension or annuity. Pension plans are distinct from life insurance plans, which are taken to cover risk in case of an unfortunate event.
Why plan for retirement?

Benefits of joining a pension plan?