Whole life insurance in Kenya is a permanent life insurance that is designed to financially protect families, especially when the bread winner passes away.
You have seen it everywhere in Kenya. When a breadwinner passes on, families are left in financial ruin and the only reasonable thing is to seek fiancial help from relatives and neighbours for funeral expenses and other basic life necessities such as school fees.
A whole life insurance is meant to prevent this and do so much more. In a few seconds, I will lay down the main purposes of this policy.
A whole life insurance policy offers a permanent life protection to the policyholder and pays a death benefit to the nominated beneficiary upon the death of the policyholder.
Unlike an endowment policy, a whole life policy does not have a maturity benefit. It only pays upon the death of the policyholder. However, a policyholder can add other benefits payable to them or nominated beneficiaries.
These additional benefits include permanent disability, critical illness, and last expense. When enrolling in a whole life policy, you add these benefits as options whereby, in the event the policyholder becomes permanently disabled or becomes critically ill, benefits associated with these unfortunate events in their life are paid so that they can carry on with their life.
In case of the unfortunate event of death, death and last expense benefits are paid to the nominated beneficiary.
In this write-up, I will break down whole life insurance in Kenya in plain, Kenyan language.
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Key Features of Kenyan Whole Life Policies (How It Works)
- The Premium Payment Term. Whole life insurance cover is a permanent cover. However, you do not have to pay for the rest of you life to remain covered. Usually, you choose a payment term set at 10, 15, and 20 years. After finishing that payment term, you pay no more and you remain covered for life. Again, you can choose to pay a one-off or a single premium and that’s it, covered for life.
- The Inflation Protector. When enrolling in whole life policy, you choose the amount you want your family to be paid when you pass away as a death benefit. As time passes, inflation might affect the guaranteed death benefit. To protect the guaranteed benefit from effects of inflation, your money grows by a particular percentage (%) each year e.g. 3%, compounded annually.
- The Medical Exam Threshold. When you enroll, you choose your guaranteed death benefit. If that benefit is below a particular amount, you are admitted without any medical exam. For example, at Britam, if you choose a guaranteed death benefit that is equal or below KES 15,000,000, you will not be subjected to a medical exam. The vice versa is true. If the death benefit is over KES 15,000,000, you will be subjected to medical exam.
- Cash Value & Policy Loans. Whole life policy is a cash value life insurance. As time goes by, your policy accumulates cash value. You can borrow against this cash (policy loan) after the policy has been active for a particular number of years (mostly 3 years) and also use it as a collateral in a bank loan.
Benefits: Why Buy Whole Life Insurance in Kenya
Whole life insurance serves different purposes in Kenya. It is used to solve real-world challenges that we face everyday as families.
- Intergenerational Wealth Transfer. High-net worth and middle-class Kenyans use this policy to leave a guaranteed, tax-free inheritance. The benefit cash be used to cover future estate transfer fees and succession taxes on family land.
- Wealth Preservation. Heirs such as your children and grandchildren share the guaranteed payout.
- Tax Efficient. All insurance benefits are not taxed including death, disability, critical illness benefits involved in whole life insurance.
- Riders (The Living Benefits). Whole life also offers other benefits when the policyholder is still alive. As options, the policy covers critical illness (immediate cash payout on diagnosis of cancer, stroke, or heart attack to cover hospital bills), permanent total disability (waives your future premiums if an accident stops you from working and an immidiate payout to help you continue with your life), and last expense cover (pays out within 48 hours to handle immediate costs).
Understanding the Costs (Realistic Estimates)
I have provided a highly scannable table so that you can estimate the rate for your whole life insurance policy. The rates are only applicable to Kenyan market. I will just provide 3 options, based on age, policy term, and a target payout of KES 5,000,000.
| Entry Age | Payment Term | Target Amount (Sum Assured) | Estimated Monthly Premium |
| 30 Years Old | 20 Years | KES 5,000,000 | KES (4,500 – 6,000) |
| 40 Years Old | 15 Years | KES 5,000,0000 | KES (8,000 – 10,500 |
| 50 Years Old | 10 Years | KES 5,000,000 | KES (20,000 – 28,000) |
Note: What affects the premium you pay (cost drivers) in insurance policies include your age, health status, smoking habits, and the length of your payment term.
The KRA Tax Advantage: How to Save on Your PAYE
If you enroll in a whole life insurance policy, you shall enjoy a tax relief.
Section 31 of the Income Tax Act grants 15% tax relief on qualified life insurance premiums, capped at KES 5,000 per month or KES 60,000 annually.
Tax Relief = 15%(Your Premium)
To access tax relief, you obtain annual contribution certificate (P9A) from the insurer.
If you are employed, submit the certificate to your employer so that the tax relief is done from payroll.
In other case, input the insurance premiums paid in the dedicated “Tax Reliefs” field on the KRA iTax portal during filing.
Having did the above, it is time to enjoy the instant discount on your payable income tax.
Whole Life versus Term Life ( Which is Best for You?)
Some people confuse whole life insurance with term life Insurance.
The key difference is that whole life is a permanent life protection and runs throughout the policyholder’s life. As long the policyholder pays it paid the regular premium, the death benefit will be honoured.
On the other hand, term life insurance only runs for a particular chosen period e.g. 5 years. It does not cover you for life. If the policyholder dies within the policy term, death benefit is paid to the nominated beneficiary. When the policy term ends, and gone policyholder dies, benefits will not be paid.
You go with whole life if you want lifelong security, want to leave a guaranteed estate, and want to finish paying off the policy during your active working years.
You go with term life if you only want to cover a temporary debt (like a 15-year mortgage) or are on a tighter budget.
To understand more about the difference between whole life and term life insurance, follow the link for more.
Whole life is mostly for protecting your heirs financially after you are gone. Sometimes, it can help you too in life insurance case of the unfortunate events of disability and critical illness.
Either way, this policy is a must have for those who want to leave a legacy.
However, whole life is not an investment to get rich quick. It is a foundation of security that prevents your family from falling into financial ruin.
For personalized whole life insurance quote based on your age and budget, full this form.
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