Why you should buy life insurance
By Pauline Muindi | March 8th 2020
In many African cultures, thinking about, or even planning on life after death, is often considered a taboo. As a result, many are wary about purchasing life insurance.
In the past, in the event of the death of parents, there were many relatives who would step in and take care of the orphaned children. Not to mention that the offspring would still inherit ancestral land, ensuring their social and financial security.
In the modern world, however, such resources have become scarce.
Extended families are no longer as close-knit; many people live in rented properties, and the cost of education is rising fast.
This is where having life insurance comes in. In the event of your untimely demise, having life insurance protects your loved ones from financial strife.
Life insurance is an essential part of sound financial planning.
Many young people think that life insurance is something that only old people should think about. But death comes to both the young and the old. In fact, young parents are the people who need life insurance the most.
Here’s why you should consider purchasing life insurance:
Taking care of loved ones
One of the biggest reasons for purchasing a life insurance is to ensure that your loved ones are financially catered for after your death.
This way, your household will not be deprived of your income. If you were the sole breadwinner in the household or you were a single parent, they can be left in dire financial straits.
The money from life insurance comes in handy towards replacing the lost income and help cover your children’s education and other expenses.
Life insurance pay out can also be used to cover the expenses incurred in the last rites such as a funeral or cremation.
Paying off debts
In Kenya, you are not legally required to pay the debts left by a deceased loved one. As per Kenyan law, the debts are owed to the deceased’s estate, not the heirs. This means that the debts are supposed to be paid off through the deceased’s savings or the sale of any property they have left behind.
Many people also assume that incase a husband or wife dies, their surviving spouse is legally required to pay the deceased’s debts. This is not the case.
The Marriage Act states that marriage does not affect the right of either spouse to own or dispose of any property other than the matrimonial property. This means that you’re also not liable for a spouse’s debts, unless the property was jointly owned.
In case the estate of the deceased is not enough to pay off all debts, the heirs are not obligated to pay. But money from life insurance can be used to pay off a deceased person’s debts. Such debts include medical bills, student loans, mortgage, unsecured loans, credit cards, car loans and debts owed to friends or relatives.
If the deceased had secured a loan to purchase an asset (such as a mortgage or auto loan), until the debt is paid, the asset belongs to the lender.
If the person who took the loan dies and the heirs don’t make any payment plans, the bank can simply sell the property and take the money owed, plus interest accrued.
Therefore, having life insurance to cover any remaining payments from such loans ensures that your heirs can inherit your property.
Bear in mind that some policies will also pay out if you become disabled or critically ill, which ensures that you’re able to pay off your debts so they don’t burden your loved ones.
To take care of your business
If you have a business partnership and your partner dies, it can leave you in a complicated situation. Unless you have a written agreement which says otherwise, your partner’s business shares are automatically inherited by their heirs.
To avoid such complications, you might take a life insurance on your business partner.
This enables you to buy their share of the business from their heirs without a hassle. You can add a clause in your business agreement to ensure that each partner is able to purchase the other’s shares in case of death.
Some life insurance policies also come with other benefits, which can help you strengthen your business. For example, you can buy an investment-cum-protection life insurance plan which pays you a lump sum amount when you outlive its term.
You can use the money to boost your business revenue.
In you take term insurance instead of whole life insurance, you will not get any payment once you outlive the coverage period.
Because of this, some people think that a term insurance isn’t a good investment.
You might also assume that you will live to an old age, and that paying life insurance premiums for all those years will be unwise.
However, we can be sure of one thing – we will all die, although no one knows when. It could be today, tomorrow, next year, or 50 years from now.
Life insurance protects your dependants from the unknowable and makes an otherwise difficult time a little easier.
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