There are a host of reasons to start an education policy for your child, from financial protection, offsetting rising cost of education, disciplined savings culture, to flexible payouts for life milestones. In this article, however, I will mainly focus on how to start an education policy for your child in Kenya.
The rising cost of education in Kenya, especially with the new CBE or IGCSE curriculum, makes it very necessary to start an education insurance policy. This ensures that the future cost of your child’s education is met and guaranteed regardless of where the life of the policyholder turns.
Since an insurance education policy is an endowment, meaning it constitutes the elements of savings and life protection, only is important to begin saving early for your child’s future education. You plan early while expectant to when they are at the very early stages of any systems curriculum. If you want to start late, you might miss out since education insurance policies start maturing after a particular number of years.
This write-up will guide you and simplify the process of starting an education policy in Kenya.
What is an education policy?
This write-up here will tell you more about education policies. In brief, an education policy is an endowment policy which combines long-term savings and life protection. You, the parent or guardian, saves for a particular period of time in years, what is referred to as the policy term, and in that period, your life is under protection from the unfortunate events of permanent disability due to illness or accident or death.
In the plan, the policyholder contributes regularly (monthly, quarterly, semi-annually, or yearly) a certain amount of money (premium) up to maturity or end of the savings or policy term.
The amount paid (sum assured/maturity payout) is paid in phases to cover the school fees of the education level targeted. For example, if an education policy is put in place to cover CBE junior secondary or IGCSE lower secondary school fees, the maturity payout will be spread in 3 phases (years) to cover the school fees of the 3 years of those two levels.
Why Parents Start Education Policies Early
There is a need to start your education insurance policy early. Starting early means you will pay less monthly contributions hence less burden since your contributions will be spread over a long time savings period.
A longer savings plan also means you will get better savings growth since your contributions will be invested for a longer time.
Early planning will also help you get prepared for the different levels of education. This means you can place several education insurance policies running concurrently since each contribution exerts little pressure to your finances. You will be ready for both secondary and university fees.
In simple terms, starting early makes education planning easier and affordable.
Things to Consider Before Starting an Education Policy
Before starting an education policy, there are certain things you must put into consideration.
- Your budget: You must run your books and arrive at a figure you can comfortably afford. An education policy requires a committed savings discipline up to maturity. You must avoid over committing.
- Your child’s age or level education: Your child’s age or level of education in any system will determine the policy term or the number of years your education insurance policy will run and contribution amounts.
- Your education goal: If your education insurance policy is to cover university fees, the premiums will be higher than saving for junior secondary. So, your education goal will determine the amount you save monthly and for how long. Use this education insurance policy calculator to do proper financial planning.
- Flexibility of the education insurance policy: You should check your education savings policy contributions structure. Some insurance education policies offer premium holidays in the last years of the term.
Step-by-Step Guide on How To Start an Education Policy in Kenya
Each level of education has its fees structure and depends on the curriculum system. For example, if you want to cover lower secondary level in the IGCSE, the school fees is around KES 4,500,000 ($35,000) combined for the 3 levels it constitutes. That translates to around KES 1,500,000 each year, for the 3 years. When you have such an estimate, you can easily start to plan for the future education of your child, and set realistic savings targets. In a case like this, you need an education insurance policy like Britam’s Boresha Elimu that pays 3 equal bonuses in the last 3 years of the policy.
- Compare Different Insurance Providers
Before you start an education insurance policy, it is good to shop around to get a plan tailor-made for the level of education you want to save for. It is also good to compare each policy’s savings growth in order to cancel out inflation. When shopping around, you should compare benefits, policy flexibility, monthly contributions (premiums), and reputation.
- Understand the Policy Terms
This is a key point. Before you commit, please understand the nature of the education insurance policy you are about to adopt. Understand exclusions, penalties, cash surrender value, and payout terms carefully.
- Submit Your Application
Having determined your education goals, shopped around, and decided the education insurance policy you want having understood it, it is time to submit your application.
Onboarding is simple and requires very easy documentation. You just provide your National Identity Card, KRA PIN certificate, and the details of the beneficiary, which include their Name, National ID Number and their relationship to you. No details of the child you are planning education for is required.
- Pay Premiums Consistently
Once your profile is created in the system, you will make the initial contribution and from there hence forth, you will be required to remit the subsequent contribution before the due date until maturity of the education policy. You must remit the contribution consistently to keep your policy active.
Common Mistakes to Avoid
If you want an education insurance policy to work so well for you there are things you should do or not do.
- Avoid starting too late as this will bring about expensive premiums and low savings growth.
- Please look at your budget and do not over commit.
- Also, note the education insurance policy terms. Do not ignore them. Keep in touch with your financial advisor all the time.
- Do not miss your regular monthly contributions (premiums) to avoid policy lapse.
- Do not expect unrealistic returns. Some part of your money goes to savings and another part to safeguarding the future education of your child guaranteeing it, through your life protection.
Understanding your education policy fully before committing will help you as a parent make better long-term decisions.
Frequently Asked Questions
- How much does it cost to start an education policy in Kenya?
Premiums for education insurance policies vary between insurers and policy types. As such, there is no single uniform premium. However, a premium starting from KES 5,000 per month spread over a long policy term is a good start point.
- Can I withdraw money before maturity?
No, you cannot access your money before the maturity of an education policy. However, in some instances, you can opt out though cash surrender value or a paid-up option when a policy reaches a particular age, defined in the policy terms. If you withdraw early, you will incur some penalties, where you get a cash back with a reduced value as compared to your savings.
- What happens if I stop paying premiums?
If for a reason you are unable to pay premiums (the monthly contributions) there is a grace period of 1-2 months before your policy lapses. If your policy lapses, you can pay the arrears and it becomes active again.
- Is an education policy worth it?
Yes, an education insurance policy is worth it. It gives savings returns while at the same time guaranteeing the future education of your child by protecting your life against the unfortunate events of permanent disability due to accident or illness and death. In case you become permanently disabled, after the 1 year grace period or so, you stop paying premiums (premium waiver) and the future premiums are paid by the insurer and you get the maturity payout as if nothing happened. In case of death, premiums are waived, and your beneficiary gets the maturity payout. An education insurance policy instills a savings discipline towards and your financial goals and keeps you in the lane if achieving that goal.
