Benefits and Disadvantages of Education Insurance Policies in Kenya.

My dear leader, let’s start this conversation by asking ourselves a simple question. Is education insurance worth it in Kenya? A simple answer is yes. An education policy is worth it. The Long answer is still a yes, but needs an explanation. You need to hear out both sides, the benefits and disadvantages of education policies, and make an informed decision. To help you make an educated choice, I will outline the benefits and drawbacks of education insurance policies in Kenya, guiding you through the known and unknown. My work as a financial advisor is to listen to you and guide you accordingly to achieve your financial goals. Let’s start with the benefits of having an education policy.

Benefits of Education Insurance for Kenyan Parents

Education policies are designed to help parents and guardians to protect and guarantee the future education costs of their children through an insurance savings plan. As such, education policies have a lot of benefits, which include:

• Education insurance policies guarantee the future education of your children. The policies promise to pay the maturity amount (sum assured) at key stages of your child’s education (primary, secondary, and tertiary levels). If you honour your commitment, the sum assured will be paid at maturity.
• Education policies instil in you a saving discipline. They make you stick to a scheduled saving plan, making you achieve a long-term future education goal that you would otherwise be unable to achieve.
• Some education policies have attractive investment returns and a well-thought-out maturity payout schedule. The amounts you contribute to the scheme grow substantially, and when it comes to payouts, you are paid at intervals that allow you to meet your school fees commitments easily.
• Most education policies have life protection. This means that in case the policyholder becomes permanently disabled, as a result of accident or illness, or dies, the policy is honoured by the insurance company at maturity. The premiums are waived, and the sum assured (and bonuses, if any) is paid at maturity. 
• Education policies allow policyholders to include optional benefits that cover their life in case of death or permanent disability.  If the event covered takes place, a lump sum is paid.
• Education policies are quite flexible. You can pay their premiums either monthly, quarterly, half-yearly, or annually, according to your financial plans. You also choose premium amounts according to your budget; there is no fixed amount. However, a minimum is set in most cases.
• At maturity, a lump sum amount is paid or staged payments when the child reaches certain ages. 
• Again, some education policies pay bonuses, increasing the total available for paying school fees.
• Education policies with a policy term of 10 years or longer introduce text relief benefits. If you are on payroll, or if you pay taxes, you will be exempted 15% of your policy premium, capped at KES 5,000 p.m or KES 60,000 p.m.
• Most education policies allow you to take a policy loan. A policy loan is usually based on the cash surrender value of your policy, determined by the insurance underwriters. The loan amount is usually 80% of the surrender value, and the repayment time is defined in the policy.
• An education policy is peace of mind. When you know as a parent that the cost of the future education of your children is guaranteed, you will definitely have peace of mind. You will sleep tight and be a happy man or woman.

Disadvantages of Education Policies in Kenya

Now let’s talk about the disadvantages of education policies. Yes, too many benefits, but we cannot write off some of the drawbacks of these policies. 

• Education policies require long-term saving commitments. They usually run from 6 to 20 years. If you don’t have a lot of patience, you take 6-12 year policy terms.
• If pledges to pay a premium at certain intervals are not honoured, it can result in policy lapse (policy being inactive), or reduced benefits. Before you commit, please ensure you have a stable income.
• Some education policies have hard structures to understand, including the payout at maturity, bonuses, and coverage. Please make sure you understand the education policy before adopting it. Ask your financial advisor to explain the technicalities in it. I am here for consultation and explanation, if you need one.
• Education policy savings are usually locked, and you cannot access them until maturity or when payout is due at certain ages levels of education, unlike investments such as the Money Market Fund, Unit Trusts, and Equities in the long-term when money is easily accessible.
• If there is a huge change in terms of education cost inflation, education savings may not keep up. However, this rarely happens unless the education system is totally overhauled or a country goes through economic hardships.

If you are financially capable, this write-up leads to one conclusion: you need an education policy. If you have more money, keep some of it in the Money Market Fund, Equities, and Unit Trusts. That way, your portfolio is well diversified and healthy.

This discussion is open, and you can contribute or ask questions in the comments section. You can also request a free education policy quote or chat with me about education policy through the WhatsApp link provided. 

See you in the next write-up. Thank you, my dear reader.