Education insurance policies are one of the best methods of building an education fund for the future. They grow your funds by generating savings returns while at the same time guaranteeing your children’s future education through life protection. Life protection in the sense that if the policyholder becomes permanently disabled as a result of accident or illness or dies, the maturity payout is guaranteed and the policyholder stops paying the regular contributions they were making (premium waiver). For these reasons, many parents turn to them to cater for the growing cost of education in Kenya under both CBE and international systems like iGCSE.
While they can be powerful financial planning tools, there are costly, common mistakes parents make with education insurance policies.
Understanding these mistakes can help parents build a more reliable education fund for their children. These common mistakes that parents make with education policies are our main topic today. The mistakes have costly consequences that reduce the effectiveness of the future education fund being built. Every parent should avoid them and follow solutions and recommendations that I am about to give for every mistake in question.
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Common Mistakes Parents Make with Education Insurance Policies
- Starting the Education Policy Too Late
Yes, starting your education insurance policy too late. Timing matters in education planning.
Late policy enrollment increases the regular contributions (premiums) you make towards your education fund. Why? Shorter period means making bigger contributions to achieve the same amount of education fund as a long-term savings period.
For example, if the goal is to have an education insurance policy that gives 3 bonuses each amounting to KES 500,000, it would be easier to save this amount of money in a long period of time rather than a shorter period of time.
When you take up an education policy matters a lot. A long period of savings gives better savings returns and puts little financial pressure on a parent because of the lower regular contributions.
It is therefore important to start an education policy when the child is unborn or new born. If you missed this at that time,do it when they are lower levels of education e.g. PP1, PP2, or early primary years while now aiming for junior secondary, senior secondary, and tertiary levels in case of CBE system.
When you start saving when the child is at your intended level, you experience a lot of financial pressure and may push you to dangerous borrowing. You will also not get the compounding effect that you would enjoy if you started early.
The earlier parents start, the easier and more affordable the education plan becomes. You can read this article about when a parent should start an education insurance policy in Kenya for more guidance.
- Choosing a Policy Without Understanding How It Works
As I interact with parents, I have realised that many have misconceptions about education policies.
Some of the common misconceptions about education policies mainly touch on:
- Premium payments
- Policy term
- Sum assured
- Bonuses
- Maturity benefits
- Savings-focused and protection-focused education plans
Premiums in an education insurance policy or any insurance policy are the regular contributions you make towards building an education fund for the future school fees and related costs of your children’s education.
Policy term is the savings period you choose in order to raise enough funds to educate your children in the future. The saving period is mostly determined by the age of your child or the level of education they are currently in.
Sum assured is the maturity payout(s), which is the amount of money you receive at the end of the saving period. It is also known as the maturity benefits. In education insurance policies, sum assured/maturity payout/maturity benefit is paid in terms of bonuses spread across the years that level takes.
For example, If you enroll in an education policy that raises school fees for junior secondary, the policy will pay 3 bonuses paid at the beginning of each year of that level.
In an education insurance policy, bonuses as the maturity payouts/maturity benefits/sum assured. As we have said above, they are spread across the period the targeted level takes.
An education insurance policy is a savings-focused and protection-focused plan. This means as you are saving for the future education costs of your children, your life is protected against disability and death.
Life protection guarantees the future education of your children by ensuring that if these unfortunate events happen to a policy holder, you stop paying the regular contributions/premiums and the maturity payouts/benefits get paid as in the agreement.
Savings-focused only education plans only focus on savings but not on life protection. In case something happens to one’s life, that savings plan fails and the children might miss out most cash-demanding levels.
When starting out, ask your financial advisor to explain to you what your education policy entails, including the terms.
Ask questions before signing up.
- Focusing Only on Low Premiums
When I tell parents not to only focus on low premiums, I don’t mean they overcommit.
It is simply telling them to match their savings with the future education costs, inflation factored in.
The cheapest policy is not the best policy. Match your policy with the future education costs of the level(s) and school type you are targeting.
By adopting cheap policies, you are risking under-funding your goals.
Choose affordable premiums, but also ensure the policy still meets future education needs.
- Ignoring Future Education Inflation
How you enroll in an education policy, do just focus on the current school fees. Also factor in inflation.
If you compare the cost of living now and some 10 years ago in Kenya, it is clear inflation has eaten a huge portion of our incomes.
KES 1,000 cannot purchase the same basket of goods it was purchasing 10 years ago. This inflation has not only affected the goods market, it has also affected the education costs. Therefore, when starting a policy, always adjust the savings goal upwards to cancel out inflation.
The cost of education has really gone up for all school types.
Do not let the danger of relying on outdated fee estimates catch on you.
- Choosing the Wrong Policy Term
The policy term (or the savings period) is informed by the age of the child or the level of education your child is currently in.
For example, if your child is new born and you enroll in an education insurance policy, with a purpose for raising funds for lower secondary under IGCSE system, the policy term should be
Around 13 years.
Why? I have assumed your child will join Kindergarten when 3 years old.
This is what the IGCSE curriculum structure looks like from the table below.
| Level & Age | Grade |
| Foundation StageAge (3 Years) | FS1 (Nursery) |
| Foundation StageAge (4 Years) | FS2 (Reception) |
| Primary SchoolAge (5-10 Years) | Year (1-6) |
| Lower SecondaryAge (11-13 Years) | Year 7 |
| Year 8 | |
| Year 9 | |
| O-level StageAge (14-15 Years) | Year 10 |
| Year 11 | |
| A-levelsAge (16-17 Years) | Year 12 |
| Year 13 | |
| University/TertiaryAge (18-21 Years) | Year 1 |
| Year 2 | |
| Year 3 | |
| Year 4 |
Choosing the wrong policy term might not coincide with the intended level of education and may result in under -funding your education goals.
The policy should mature when the money is actually needed.
- Failing to Review and Adjust the Policy Over Time
When you place an education policy don’t just sit and wait for it to mature.
Keep in touch with your financial advisor and review the policies time to time to ensure they are still relevant to your long-term education goals.
Inflation, change of income, and change of mind may render them ineffective.
Why life circumstances change. If the policies seem insufficient you can add others to improve education savings.
Education planning should evolve with the family’s financial situation or changing priorities.
- Missing Premium Payments
An education insurance policy requires a consistent and disciplined savings culture.
Contributing regularly as per the schedule is not a choice but a must culture.
Education policies are structured savings plans and failure to make the regular premiums will result in policy lapse.
This means you are losing in achieving your long-term savings goal.
Lapsed policies have consequences. Life protection stops and your education plan is in a limbo due to reduced maturity payouts/benefits/bonuses.
To avoid falling behind in premium payments, there are certain important things you can do:
- Automate payments e.g. salary deductions through check-off, M-pesa ratiba, and bank direct debit/standing order.
- Budgeting so that money going to education savings is available
- Choosing affordable contributions. Do not over commit.
Consistency is critical for the success of an education policy.
- Depending Only on an Education Policy
I always advise on several savings strategies, even not all going to education savings.
Diversify your savings. Have a money market fund, SACCO savings, fixed deposit, or an Investment. Fixed deposit is the least effective method of building wealth as of now due to their low return rates.
Have emergency funds for unexpected school expenses. A balanced education plan reduces financial risk.
- Ignoring the Insurance Protection Benefits
When I interact with parents when planning for education, one thing I notice is their concentration only on the money part, their money and savings returns.
They forget the insurance protection part. An education insurance policy is an endowment policy that combines savings with life protection.
An education policy life benefits mostly include:
- Death benefit/cover
- Permanent disability due to illness or accident
- Critical illness (where applicable)
Life protection is very critical and carries a lot of weight in ensuring your future education goals are met regardless of the twists of life.
The future education of the child is guaranteed even if the parent is not there or is unable to get involved in income generating activities as a result of disability.
Money is very important, and so is life protection. Education insurance is not just about saving. It is also about financial protection.
- Buying a Policy Without Comparing Providers
It is important that you also compare education insurance providers.
By not doing so, you might leave money on the table or not get the best life protection available in the market.
It is good to compare among providers:
- Bonuses
- Flexibility
- Premium structure
- Claim settlement reputation
- Customer service
Also compare between multiple education plans with the same provider. Some education policies are superior to others.
For great savings returns and life protection, I recommend you review Boresha Elimu and Msingi Poa.
Comparing policies helps parents choose a plan that fits their goals and budget.
- Not Involving Financial Advisors or Doing Enough Research
Yes. It is wise to involve a financial advisor.
We have been in this industry for a while and the research you are doing looking for an education insurance policy that aligns with your plan can become solid if you involve a financial advisor.
Most parents buy policies based on marketing alone. That is not enough. We have deep inside information that will definitely help you.
Professional guidance comes with benefits. It saves time and helps you get an education policy suitable to you.
Ask them to help you understand the terms and ask for projections.
You will avoid costly mistakes. Informed decisions lead to better education planning outcomes.
If you need help planning for future education costs, please reach out to me.
I have a pool of information that you need to hear, and I will help you design an education plan that is future proof, one without mistakes.
On enrolling you, we shall keep reviewing them together to ensure they still align with your then goals and cash flow.
Thank you!
