As I walk around talking to people about education Insurance policy, or rather education policy, you realise only a small portion of us know exactly what it is. And for those who know about it, the information they have is scanty and misleading. Today, I walk you through education policy from a financial advisor in insurance perspective.
What is an education Insurance policy?
In layman’s definition, an education policy is a cover or a guarantee by an insurance company that they will pay an agreed amount(s) of money at certain dates (maturity) to cover the cost of your child’s education in the future, if you honour your obligation to pay certain premiums/contributions in the term of your education policy.
These premiums are continuous in the life of the education policy and are determined by the amount you want to be paid (Sum Assured) at the maturity of the policy. That means the premiums are flexible, and anyone with an income can afford them. The premiums are paid monthly, quarterly, semi-annually, or yearly. The choice is yours.
I don’t want to assume that you fully understood what ” sum assured ” is when I mentioned it above. In simple terms, sum assured is the amount of money that an insurance policy pays at maturity, and is determined by the premiums you pay as agreed with the insurance company.
Education policies are tailored or designed to suit different needs, curricula, and levels of education. So, each insurance company comes up with their education policies to meet the needs of its target market. For instance, at Britam, we have different education policies focusing on the different needs of our market. Our Boresha Elimu Insurance Policy is designed to cover your child under the CBE curriculum (2-6-3-3-3 format). Boresha Elimu has 6-18 year terms, meaning you can take a 6-year term policy, a 7-year term policy, an 8-year term policy, and so on up to an 18-year term policy. The higher the policy terms, the higher the sum assured, holding the premiums constant. What do I mean? It means that if you are paying a premium of KES 10,000 monthly, you will get a higher sum assured at maturity in a 10-year term policy than a 6-year term policy. But the term you choose depends mostly on the level your child is in the CBE system, and you can take more than one education policy to cater for different levels in the CBE system. You can take a policy that caters to junior secondary, another for Senior secondary, and another for the tertiary level. Boresha Elimu has 3 guaranteed lump sum payouts at the last 3 years of the policy, equal to the sum assured, and you will not pay premiums in the last 2 years of your policy. We also have other education policies at Britam, including Super E, Msingi Poa, and Elimu Smart. All catering for different needs, levels of education and preferences of our clients.
So far, we have seen that an education policy has some premiums/contributions, sum assured (amount to be paid at maturity), and the duration (policy terms). Besides those, education policies have protection to ensure that regardless of where life takes you, the future cost of your child will be taken care of.
Use the following education insurance calculators to understand more about school fees planning with figures.
Most education policies have built-in life and death covers. In case you become permanently disabled due to illness or accident, or you pass away, the policy will pay at maturity, and you will stop paying premiums. Of course, each policy has its own terms, but these are universal benefits or features of an education policy. You can also choose to add optional benefits to your policy, and that act of increasing protection benefits will push premiums a little bit higher.
Breaking The Ice: Truth About Education Policy
When we go out marketing education policies, some people refuse to listen to us because they have preconceived notions that insurance companies do not pay or honour their obligations. This part is about clearing all the misunderstandings between you and us.
First, we do honour our obligations, and we guide you properly, informing you on everything you need to do up to when your policy matures and beyond.
Why do some people think we do not honour our obligations? Here are some of the reasons that you might do during the term of your policy that make it null and void.
Remember the commitments an insurance company makes when they enter an agreement with you. They commit that in case you become permanently disabled due to accident or illness or pass away within the policy terms, they will pay the sum assured regardless, and you stop paying premiums (premium waiver). That is a huge commitment. Your life is fully covered, and the cost of your children’s education is guaranteed. For such a commitment, you also need to honour the terms of your education policy. Each education policy has its own terms.
One of the reasons why people lose money is when they stop paying their premiums very early. Every education policy stipulates it’s terms and conditions. Let me give you an example again with our Boresha Elimu education policy. The policy is designed in a way that you must make your monthly contributions up to the 25th month without stopping, even if you want out. You can only opt out after the 25 month. In case you opt out before the 25th month, you policy remains inactive and you cannot claim your money unless you clear the arrears or redate it. If you are facing continued financial difficulties and can clear the arrears and pay up to the 25th month of the policy and opt out through a cash surrender value or a paid up option. In a few seconds, I will explain both scenarios here.
Matters of money need a financial advisor who cares and can guide you accordingly without hiding any information. That’s why the financial advisor and the insurance company you choose are very important to your financial progress. You need a company with a high reputation and good standards, and a financial advisor who can advise you throughout and follow up on your policies, keeping them up to date.
So let me now explain what I left behind; cash surrender value and paid-up option. If you pay up to the 25th Month and above, and you are unable to continue due to financial challenges or any other reason, you can choose any of the two (2) options to get your money back. You can opt for Cash Surrender Value, which is an amount that is decided by the insurance underwriter. A calculation is done based on your contribution and other many factors and a value is determined (the amount you are going to receive). Another way is to go for the paid-up option, whereby you let the premiums you have contributed remain with the insurance company up to the maturity of your education policy, and in this case, you get a lesser sum assured than what had been guaranteed, since you didn’t contribute to the term of the policy. A recalculation of the sum assured is done given how long you contributed.
Types of Education Policies
Insurance’s core business is to protect and guarantee your life. Your health is paramount. Insurance policies, risks and benefits are based mostly on your health and age. Health and age have a very high direct correlation. Based on health, we have two education Insurance policy options.
Education Policy (Without Medicals)
This is a very direct policy option. You choose not to see a doctor for a medical checkup. It is for those who want a quick onboarding process and are looking for a lower sum assured. The money you receive at maturity (sum assured) is capped (an upper limit is put) since your health status is unknown. If you want to receive a huge payout (in millions of shillings) at the end of the policy maturity, you go for the “with medical policy” option.
Education Policy (With Medicals)
In this option, you agree to visit a doctor appointed by an insurance company, but you foot the bill, usually a few thousand (around KES 3,000 – 5,000). The medical report is sent to the insurance company, and based on the report, they can agree or decline to take up your policy. The benefit of doing a medical check-up is that the amount you receive at maturity of the policy term (sum assured) increases substantially and may not have an upper limit, unlike someone who chooses not to go for medicals, as I have advised above.
Education Insurance Policy Loan
Some education policies are designed in a way that you can take a policy loan. To be eligible for a policy loan, a certain number of years of the policy term must have lapsed, e.g. 2 years or 3 years of the policy terms and the policy must be up to date or active.
The loan is payable within a particular number of months/years, and the maximum amount of loan you are eligible for is based on your policy cash surrender value, e.g. a maximum 80% of cash surrender value. Cash surrender value is determined by the underwriters.
Entry Age of Education Policies
The entry age of the life assured at inception is 18 years, and the maximum age depends on a lot of factors determined by the underwriters, but it is around 55-60 years. If you are already covered, having qualified the entry age barrier, the maximum age on cover is around 70 years.
Benefits of Taking An Education Policy
- You will get a guaranteed payout(s) as stipulated by your education policy within the policy terms or at maturity. This amount is the one that gives you peace of mind knowing that the future cost of your child’s education is already taken care of.
- Waiver of premium. If stated by your education policy, like our education policies at Britam, you stop paying premiums if you become permanently disabled due to illness or accident or in the event of death (may God forbid, shindwe).
- Some education policies allow you to increase or add life and death cover. This, however, increases the premiums payable.
- Education policy plans offer high savings returns. Your premiums will be substantially boosted for a higher payout(s) within the policy term or at maturity.
- The policy term is flexible, catering for short, medium, and long-term planning.
- If you take a policy of 10 years or above, you get a tax relief benefit of 15% of premiums payable, capped at a maximum of KES 5,000 p.m/60,000 p.a.
- Some education insurance policies are designed with a policy loan provision with friendly interest rates payable within a particular number of years.
And finally, this part is for you to write to me by asking questions or quotations. If there’s something that didn’t come out clearly to you, ask me questions in the comments section or contribute to this write-up. An education insurance policy is your way to guarantee the future education of your children. Education is the best gift you can give your young ones.
Hello there! I am David Ndiritu. I am a financial advisor at Britam. My role is to advise you on investments, savings, pensions, protection, medical insurance, education policies, and general insurance, including motor insurance. I am passionate about what I do, and I derive great satisfaction when we find a solution together to your financial goals. If you are looking for a financial solution related to insurance, investment, or pension, chat with me or give me a call. You can also ask for a QUOTE FREE OF CHARGE. Thank you, and I am happy you are here, my dear reader.
