Life is full of surprises and there is no certainty about you being here tomorrow or what will happen to your beneficiaries thereafter. This is even more crucial for women, who nurture and hold families together. That is why investing in a life policy is a wise move. Generally, insurance is a risk transfer mechanism particularly meant to transfer the financial burden one would face to a professional (insurance company) who is well-positioned to handle it.

Understanding the policy

Bernice Muhirwa, a Wealth Manager at Stanbic Bank, says before one takes up any insurance policy, they should understand what it entails.

“Generally, the concept of insurance is that they pull money from different people to help the few that get an incidence. Ideally, a life assurance covers your life; in the event that something happens to you, a certain amount is paid to your beneficiaries.  The agent will calculate your premium in light of your prospective sum assured,” she says. The frequency of paying differs from person to person as well as from company to company because it is not written in stone.

Evolution of the policy

Years back, life policy was purely about life, only kicking in after the insurer has passed on. However, Muhirwa says, with time, it has evolved to bring in other aspects such as insurance, allowing for withdrawals with limits. This is a hybrid or endowment policy.

While many aspects of the policy can be discussed, for one to get the most out of a life policy, they should save without withdrawing until the end the stated period. “In fact, some policies do not allow for one to withdraw before the end of three years,” Muhirwa says.

Shopping for a life policy

Florence Nabakiibi of ICEA Uganda says a good Life Insurance Policy must offer value to the customer’s need over a long period of time.

“Life policies are meant to provide benefits for either early death or at maturity where the Life Assured has lived up to the end of the policy term.”

Ernest Bazanye, an actuary at Kenbright Actuarial and Financial Services, says to purchase life cover, one must put into consideration the why? “Do you have any beneficiaries whose standard of living might be affected in the unfortunate event of death? If so get a life insurance policy. Do you wish to save for a certain target and also get bonuses on your saving? Then life insurance is ideal seeing that it has evolved to afford you bonuses plus what you saved,” he says.

Coverage needed

Nabakiibi says coverage varies from person to person based on their needs, circumstances such as age, family size, level of income, and other alternatives available. In the same vein, the rates will vary from company to company based on the product structure and scope of cover. “The premium (price one pays) for life Insurance, is age-sensitive. Younger lives tend to pay less than older lives,” she explains.

That said, Muhirwa says there are companies that go as low as Shs100,000 meaning one can always get a policy that works for them.

“You should remember that the sum assured accrues from what they deposit as per agreed payment periods. That said, do not delay to start even if your premium is lower than that of your friend. That way, you are making headway towards your goals,” she says

Persons not insured

Nabakiibi says people excluded from life assurance will vary based on the product one chooses. “Exclusions are usually due to age or pre-existing conditions. These will specify what the policy does not cover.”

That is why Muhirwa emphasises the need to ask for information so that one makes an informed decision.

“Women must take up life assurance for reasons beyond, “My friend did so, so should I”. You must read the policy and ask all the questions that may arise. This is your money and you need to understand how the policy works and your benefits. That is not forgetting the minimum or maximum premium to pay, the grace period, and what happens when you default. You must also know if and when you can withdraw plus the limitations that exist. It is painful to hit a wall only to be shown a clause you over-looked. As such, ask exhaustively and the answers must make sense to you,” she advises.

Muhirwa adds that if one gets a life policy because it is a ‘trend’, chances are they may lose the drive to keep paying the premium when the excitement wears off. Summarily, the idea of delegating someone to understand these financial matters for you is wrong.

In addition to that, Nabakiibi says one needs to work with an insurance agent who is ready to answer all your questions. “They should be able to advise you on the products available and assist you to do a needs analysis to select the most suitable product for you.”

Benefits

Insurance takes away the risk that comes with death.  “That way, the welfare of your beneficiaries upon your demise is not in a precarious place,” Muhirwa says.

Some policies, seeing that access is denied yet you have to pay in, push one to save. For example, one may start with those of five years. “Moreover, these are regulated companies so you should not be weary that your money will be swindled,” she advises.

It helps with financial planning because some policies such as the education policy also have a sum assured therein. “That means that besides your children’s welfare being taken care of, they will not be out of school when you are gone,” she says.

General outlook of life insurance

Although there are several benefits to life insurance, on a whole, insurance uptake in Uganda is still low. “There is lack of trust from the population and low penetration. However, it can pick up with more targeted initiatives to drive awareness and the benefits of being insured. More confidence needs to be instilled in the public to trust that insurance is a viable risk transfer mechanism and to also change the ‘insurance does not pay’ mentality,” Nabakiibi says.