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21 February, 2022

Over time, financial plans have focused on three key goals – freedom from debt, rainy day savings and wealth generation through investments – leaving insurance plans as an additional separate aspect. However, given the direct impact on one’s finances, insurance planning forms an importance aspect of one’s capability to achieve their other financial goals. Insurance covers help give one a financial protective cover against different types of financial risks. Despite the importance of insurance, Kenya’s insurance penetration rate remains at a paltry 2.2%, as per the IRA Annual Report 2020 behind countries like South Africa which had an insurance penetration rate of 13.7%, and the global average of 7.4%, as of 2020.

Insurance is an important part of financial planning because it protects an individual and their loved ones from costs and losses associated with accidents, disability, natural disasters, illnesses and death. Some of the main benefits of insurance include:

  1. Financial Security – A key benefit of insurance is the replacement of lost or damaged assets. Insurance covers can, for example, help to minimize business disruptions or even income disruption,
  2. Medium of saving and wealth generation – Some insurance covers help you save towards different financial goals in a regulated and low-risk environment. These types of insurance covers include Unit Linked long term insurance policies whereby 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,
  3. Peace of mind – Insurance helps improve the quality of one’s life as it assures them that if anything adverse were to happen to their loved ones or assets, they will have gain financial respite, and,
  4. Protection of your loved ones – While money cannot replace the presence of a family member, taking covers such as life insurance can help in ensuring that even after one is gone, the family and dependents have some funds to endure any financial hardship.

There are two main forms of insurance namely life / long term and general / short term insurance. The key difference is that life insurance contracts are usually more than one year while general insurance contracts are for one year or less. Understanding the various types of insurance policies is key as each policy type has different sub-classes and rating factors. For instance, property insurance is divided into domestic insurance, fire and allied perils, burglary insurance, plate glass and all risk insurance. All these types of insurances have different rating factors and hence, our view is that it is vital that an individual or firm seeks professional advice before purchasing insurance policies to ensure that their specific needs are met.

Below is a table showing the different stages of one’s life and common policies taken in each:

Stage in Life/Employment Status

Common Types of Insurance for the Stage

Young Adult (Single)

  • Personal Accident Cover
  • Health Insurance
  • Burglary cover


  • Life insurance
  • Mortgage Insurance
  • Domestic/Home insurance
  • Investments/Endowment plans
  • Pension

Married with Children

  • Life insurance
  • Education Plans
  • Domestic/Home insurance
  • Investments/Endowment plans
  • Pension

Business Owner

  • WIBA
  • Professional indemnity
  • Business interruption
  • Goods-in-transit
  • Money insurance
  • Theft insurance
  • Fire and perils.


  • Health Insurance (May be provided by employer)
  • Life insurance (May be provided by employer)
  • Pension


  • Medical Insurance
  • Annuities/ Draw down

Financial planning is a practice that can be tailor made for any need and with insurance plans being a vital need, we believe that more Kenyans should include insurance plans as part of their comprehensive financial plan. Below are a few tips that are useful when looking for an insurance cover in Kenya:

  1. Shop around - There are many insurance companies and a wide variety of coverages out there. If you’re looking for clarification, you may want to consider working with an agent (who sells insurance for just one company) or through an insurance broker (who represents multiple insurance companies) instead of buying online directly,
  2. Ask your insurance provider what the policy does not cover - Every insurance policy lists perils that are not covered, known as “exclusions”. It is important to ask the insurance provider to explain the exclusions in your policy at the outset, which will save you the stress and frustration of discovering them after you incur damage or a loss,
  3. Consider bundling several policies with one insurance company - If you are looking to insure multiple vehicles or obtain multiple types of business coverage (like liability, property, and cyber risk), then you may want to find a single insurance provider who carries multiple products and enjoy possible discounts (usually through negotiations),
  4. Review your insurance needs on a yearly basis - As your needs evolve, so will your insurance policy. When you’ve made a change, it’s important to consider whether your policy needs to adapt to new risk exposures
  5. Do not defer payments - Default of payment is considered a “bad risk”, which can lead to a higher rate. If you decide you do not want to renew your policy, you should immediately notify the insurer in writing, and,
  6. Take measures to minimize risk and prevent loss - Risk management can go a long way in helping you stay protected e.g. if it is a home insurance, install CCTVs, hire a security guard etc. This also help in minimizing premiums. Good planning and the right protection can help you stay ahead of risk in your day-to-day operations.

For more information, kindly see our topical on Insurance Financial Planning.