How life insurance can save you and ypur family

Tuesday August 10 2021
Insurance pic

By Benjamin Nkaka

We live in the world full of uncertainties. We don’t what tomorrow would bring us while responsibilities keep equally increasing significantly. Life insurance is a response to all these uncertainties. It is important to think that when your family suffers a crisis that transcends finances, at least it won’t be impacted too negatively. If a breadwinner of the family dies, a spouse and children won’t have to beg for alms or drop from school.

The social and economic impact of Covid-19 pandemic is driving new thinking in terms of how we view risks. The future has become uncertain. During such unforeseen times we need to evaluate ourselves and make sound decisions. Life insurance has never been more important. No one will ever go wrong with life insurance.

There is very little awareness on life insurance and insurance related matters in Tanzania. As such, life insurance is a nascent idea and most people do not think about it as an investment plan. With the increase of inflation, taxes or business uncertainties it is important for individuals to focus on financial planning at the early stage.

Savings through fixed deposits, stocks and treasury bonds are very common financial planning tools that people use these days but life insurance is not in the list.

Life insurance is a contract designed to pay a lump sum after a specific term (on its ‘maturity’) or on death. Typical maturities are ten, fifteen or twenty years up to a certain age limit. Some policies also pay out in the case of critical illness.

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While the main objective of buying a life insurance policy is to protect one’s family from unforeseen circumstances, it can also help in preservation and give access to liquidity at a difficult time, if added as a component of financial planning for dependents.

There is no specific time to start buying life insurance cover but the earlier in life the better because premiums increase with age. In addition, it should be bought before the retirement age so that it helps in preparation for financial stability after retirement.

Life insurance would require you to pay for a monthly premium or annual premium for the entire period of the contract to fulfil your objective. When your contract comes to an end you or the beneficiary will receive a lump sum amount coupled with bonuses and every month you will receive a pay depending on the type of the contract. In other cases you will continue to receive payment until the last day of your life.

This type of financial plan does not need you to employ anyone to take care of your insurance neither does it require any cost apart monthly premiums. Come rain come drought your benefits or savings will never be affected. Neither inflation nor taxes will affect your benefits.

Another important reason why you need to invest in life insurance is that some products will continue to fund your child’s education in the event the primary earner unexpected demise.

Planning for children’s education is not a common agenda in many families. When the time comes to take the child to school financial stress begins to prick, if this can happen when the breadwinner is alive it’s difficult to imagine what can happen when the breadwinner is gone.

I was speaking to a friend and asked him why he was not interested in buying life insurance but he has insurance for his house, car and even for his expensive mobile phone, yet he had a family he was supposed to worry about. His response made me chuckle, but then he remained serious and offended. He truly had a superstitious fear that if he bought life insurance, then suddenly he would be more likely to die.

After my engagement with a number of people it turns out that superstitious thinking like that are common reason people avoid buying life insurance because they would assume it’s a bad omen. My advice to my friends is that if you buy life insurance, your risk of dying will not increase. In fact, the peace of mind of knowing that your loved ones would be financially fine even if you were to die, hence bringing a sense of calm and security, ultimately lowering blood pressure.

Most people overestimate the cost of life insurance thinking that it is very expensive to afford.

However, premiums are usually affordable and one is able to select an option that aligns to his or her financial ability to pay for monthly contributions.

As much as there is a shift to using channels in other services including banking leading to an increase in usage and timely delivery of services, insurers offering insurance services should aggressively promote their services and digitize customer journeys to create the demand as digital solutions has proved to be the most accepted and preferred distribution channel.

Life insurance service providers should also adopt and leverage on partnerships and this will lead to fulfilling unmet needs and reach unserved customers.

Partnering effectively can be a vital factor in promoting life insurance services. Insurers should consider designing partner-centric business model with banks and telecoms to make insurance accessible to low-income clients and gain access to large existing client bases.



Mr Nkaka is an expert in insurance based in Dar es Salaam