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FAQ's
Why do you need Life Assurance?Life assurance should be an essential part of every person's lifespan plan. Upon death and disability or sickness and/or retirement, life assurance provides financial income to yourself and/or your beneficiaries. It may also provide safety net to pay off your personal debt so that your dependents are not burdened with additional financial obligations.
It's a plan of good conscious and a financial safety net in times of unexpected death, disability, sickness and retirement. An important feature of life insurance is that the amounts paid to you or your beneficiaries are not subject to income tax. How much Life Assurance do you need?You should base the amount of life assurance on your current financial and your family's needs. You could ask, "How much current financial obligation do you have? How much does your family need to protect them in case of your death/disability, sickness, and retirement?" The following are some considerations and determinants: -
- Immediate financial obligations upon death - final medical expenses, funeral costs, and estate taxes.
- Funds to cover life adjustments for survivors - previous debt, cost and time of job search and/or possible re-location.
- Ongoing expenses - monthly bills, rent, mortgage, school tuition, day-care, medication, day-to-day basics, and retirement needs.
- The number of years and income would be needed by your dependents
- The standard of living you would like your dependents to have
- The amount of outstanding debt you would need to pay off
- Other sources of income that would be available to your dependents
- What your dependents' future educational needs will be. An often-used general guideline is that your life insurance should cover 5 to 7 times your annual income. It is also good idea to frequently review your needs in relation to your policy since adjustments are needed, your policy can be reviewed accordingly.
What should you consider if you want to replace your current policy?Changing from your current policy to another is an option and your right, but may not provide you any significant advantage. Chances are you will pay a higher premium for a new cover - if only for the fact that you are older or your health has notably changed. A better alternative may be to ask about additional options or riders to your current policy. When should you purchase Life Assurance?The best time to purchase life assurance is usually determined by the individual. Usually, it is now! ---- If it has not been done before! If you feel you have people you want to protect, or a significant debt you wish to avoid passing on to your family - related to death, disability, medical expenses and or retirement - then you should purchase a life cover now! It is never too early to plan for the unexpected. Depending on the type of policy you choose, it would be a good means of contributing towards a fund you can draw on sooner than later. What do you need to consider when naming your beneficiaries?Be explicit when naming a beneficiary. Name a contingent, or secondary, beneficiary as a precaution, in case you outlive your first beneficiary. Occasionally, at least annually, review your designated beneficiaries because you may have married or had another child in the family or one of the beneficiaries may have changed his or her name or address. Can you get Life Assurance if you have a pre-existing medical problem?It depends on what the illness/medical condition is. The material facts will be elicited through a medical examination report from any of our medical examiners. Today, it is often likely that pre existing medical problems be controlled with treatment, prescriptions, and diet. We will take these factors into consideration. Can a Life Insurance Company cancel existing policy if policyholder develops a serious illness after he/she is already insured?No, a life insurance company cannot cancel an existing policy due to the onset of a serious illness. However, benefits can be denied if it is determined that a policyholder knew they had the disease prior to applying for the insurance and misrepresented or concealed the fact(s) in their application. Are the premiums and maturity proceeds for life assurance policy tax-deductible and not subject to income taxes?Yes, but if your employer pays your premiums, your benefits will generally be taxable as ordinary income. Generally though, there are reasonable tax-incentives for long-term insurances, both in premium and maturity proceed terms, as there are incentives for pensions purchases. What happens if you can't continue paying your premium payment?You have the option of suspending premium payment, or subsidizing your payments with policy bonuses, if any. If you take the first option, then your policy options would be: -
- Paid-up insurance - in this option, you can use the cash value to purchase an insurance policy with a lower death benefit.
- Extended term insurance - you can use the cash value to buy a term policy death benefit equal to that of the original policy.
- Receive the cash value - you can receive as a single or as instalment payments.
- Utilise the 30-day grace period on your policy in order to arrange for payment before your policy lapses.
Can a Life Insurance Company refuse to pay death benefits if the policyholder knowingly provides false information?Yes, a life assurance policy is generally invalid if the policyholder knowingly provides false information to the insurance company and dies within two (2) years of receiving the policy. However, the false information has to be 'material' to the decision at the point of issue the policy. Hence, mistakenly providing the wrong address will not invalidate a policy, but not disclosing a pre-existing medical condition could. Are employer-sponsored group disability insurance policies "portable" i.e. can you keep your coverage even if you lose your job?No, most group disability coverages are not "portable". So, when you leave your employer or the group, you lose the life assurance ----- hence, the reason for purchasing your own individual life assurance covers while still working. How are policy loans treated?When a policy loan is taken, loan interest is charged, usually at market rate, from the date of the loan to the next policy anniversary. Each year on your policy anniversary, you will be billed for the annual loan and interest, based on the outstanding loan balance. If the interest is not paid, it will be added to the outstanding loan balance on your policy. If the policy has an outstanding loan at the time of your death, this amount will be deducted from the death proceeds. What questions should you consider in borrowing against the cash-value of your policy?If borrowing against the cash value of your policy is an option, here are the things you need to consider: -
- Is there a limit or restriction on the amount of the cash value I can borrow?
- What is the interest rate?
- How quickly do I have to repay the loan?
- Can my bonuses be applied to the payment of the loan?
- What is the effect of my loan on the surrender value or maturity or death benefit?
What is the difference between the Term Life Assurance and Permanent Assurance?Term Life Assurance provides protection for a specific period of time, and pays benefits only if you die and/or become disabled during the time in which your policy is in force. Permanent assurance provides lifelong benefits as long as you continue to pay your premiums. Term assurance coverage, however, ends at the completion of the term, and since premiums increase periodically, may become too expensive to continue. The premiums for Permanent assurance remain constant for the rest of your life. Permanent insurance also builds cash-surrender values, while term insurance does not. What are "Real-Life-Stories" that justify purchase of life assurance cover?
- Final Dignities - A terminal and critical illnesses like cancer can take away ones dignity. A man diagnosed with a terminal illness with an appropriate insurance cover will receive death benefits in advance to live the remainder of his life comfortably and take advantage of the time he has.
- Easing a Tragedy of a Widow - The value of insurance after a tragic car accident that takes the lives of her husband (and oldest even a son) can leave a widow devastated. Life Assurance death proceeds will ease this tragedy.
- Keeping a roof over their heads and Renewing hope for life - A surviving mother with a terminal disease ensures that finances for her remaining family are secure. Her husband's unexpected death does not cause her unending financial grief.
- Preserving a legacy - Accelerated benefits from a life assurance policy provides steady income for a family and help pay costly medical bills and will enable a dying a man to fulfil his life's greatest dream.
- Making a difference and easing a family tragedy - Through maintaining a safety net and carefully investing the life insurance proceeds to enable survivors to maintain the standard of living without acquiring debt.
- Health Insurance at a small price - Health insurance helps a woman overcome a costly heart transplant, giving her new hope for the future and A small price indeed for, say, a child and/or whole family's need for medical care.
Should an agent/broker remit premiums net of commission?No. The Insurance Act requires premium to be paid gross and thereafter commission be paid to the intermediary. Must an agent/broker ask for commission before it can be processed?No. All accounts with credit balance will have their commissions automatically processed after end of the month. Is commission only payable when an account is in credit?All accounts with credit balance will have their commissions automatically processed after end of the month. However, when the account is in debit, commission will be paid once the intermediary avails a written acceptable payment plan of the outstanding premium. What are the commission payment dates?Commission cheques are processed by 7th of the following month What if I require commission payment at any other time within the month?Please let us know and we shall be happy to assist. Is commission payable on postdated cheques held by the insurer?NO When paying commissions why do you deduct withholding tax even on items whose commission is not being paid?As required by law, withholding tax is deductible and payable to KRA immediately the debit notes are raised even when payment has not been done. This is the same way premium tax and other taxes are remitted once income is booked. When should we expect our monthly statements of account?Not later than 3rd day after the close of the month. This is mainly sent via email and hard copy to those without email address Can I get a reconciliation of my Statement of account?Yes. This will be sent to you by 15th of the following month. Why are there some cases where names of insured do not appear on the statement for receipts?With effect from August 2011 all receipts are allocated as per policy and blank spaces no longer occur. How long does it take to get a claim cheque?Maximum of four days after submission of Discharge voucher to claims department.
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