Life insurance is a contract between an insured and an insurer whereof the insurer promises to pay the beneficiary a sum of one upon the death of the insured person. Depending on the contract occurring terminal illness may also trigger payment. The policy holder typically pays a premium, either regularly or as a lump sum. When the insured dies, funeral expenses are also sometimes included in the benefits.

The advantage is that the policy owner has a peace of mind knowing that the death of the insured person will not result in financial hardship for loved ones.

Specific exclusions are often written into the contract to limit the liability of the insurer; common examples are claims relating to suicide, fraud, war, riot and civil commotion.

Examples of life insurances

• Permanent life insurance is life insurance that remains active until the insurance policy matures, unless the insurance owner fails to pay the premium on time. The policy cannot be cancelled by the insurer for any reason except in cases of fraud. I such a case, a cancellation must occur within a period of time as defined by law. A permanent insurance policy accumulates as cash value, reducing the risk to which the insurance company is exposed, and thus also reduces the insurance expense over time. This means that a policy with a million dollar face value can be relatively expensive to a 70-year-old person. The owner can access the money in the cash value by withdrawing money, borrowing the cash value, or surrendering the policy and receive the surrender value.
• Accidental death  is a limited life insurance designed to cover the insured should they die due to an accident. Accidents include anything from an injury but do not typically cover deaths resulting from health problems or suicide. Because they only cover accidents, these policies are much less expensive than other life insurance policies. Accidental death policies rarely pay a benefit, because the cause of death is not covered by the policy, or the coverage is not maintained after the accident until death occurs. To be aware of what coverage they have, an insured should always review their policy for what it covers and what it excludes.
• Endowments are policies in which the cumulative cash value of the policy equals the death benefit at a certain age. The age at which this condition is reached is known as the endowment age. Endowments are considerably more expensive (in terms of annual premiums) than either whole life or universal life because the premium paying period is shortened and the endowment date is earlier.

An insurance policy is a contract between the insurer and the insured which determines the claims which the insurer is legally required to pay. For payment, the insurer pays for damages to the insured which are caused by covered expenses under the policy language. Insurance contracts are designed to meet specific needs and thus have many features not found in many other types of contracts. Since insurance policies are standard forms, they have a special language which is similar across a wide variety of different types of insurance policies.

The insurance policy is generally an integrated contract, meaning that it includes all forms associated with the agreement between the insured and insurer.

Examples of Insurance policies
Insurance policies are of different types and I have mentioned them as below:

• Auto / vehicle insurance protects the policy holder against financial loss in the event of an incident involving a vehicle he or she owns for example in road accident.

  The insurance coverage includes:

  1. Property coverage, for damage to or theft of the car.
  2. Liability coverage, for the legal responsibility to others for injury or damage.
  3. Medical coverage, for the cost of treating injuries, rehabilitation and sometimes lost money and funeral expenses.
• Life insurance provides a monetary benefit to the beneficiary’s family, and may specifically provide for income to an insured person’s family, burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or annually.

  Certain life insurance contracts accumulate cash values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as annuities and endowment policies, are financial instruments to accumulate or liquidate wealth when it is needed.

• Burial insurance is an old type of life insurance which is paid out upon death to cover final expenses, for example funeral expenses.
• Liability insurance covers legal claims against the insured. Many types of insurance include an aspect of liability coverage. For example, a home loan or mortgage insurance policy will normally include liability coverage which protects the insured in the event of a claim brought by someone who gets injured on the property. Automobile / motor vehicle insurance also includes an aspect of liability insurance that indemnifies against the harm that a crashing car can cause to others’ lives, health, or property. Liability policies typically cover only the negligence of the insured, and will not apply to results of intentional acts by the insured.
• Credit insurance repays some or all of a loan when certain circumstances arise to the borrower such as unemployment, disability, or death. Many credit cards offer payment protection plans which are a form of credit insurance.

Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for payment. It is a form of risk management primarily used to prevent the risk of an uncertain loss.

Its history in Kenya
The insurance industry in Kenya is regulated by the Insurance Regulatory Authority (IRA) which was set up in 2008. IRA work is to work at improving the regulation and stability of the insurance industry.

The insurance regulatory Authority placed Blue Shield Insurance as another under writer in 2011.The Authority, in partnership with the Commissioner of Police, started the Insurance Investigation Unit to investigate insurance fraud. It also registered the first Islamic insurance firm – First Takafu.

Previously, IRA was a department of the Ministry of Finance, which administered the insurance industry, headed by the Commissioner of Insurance.

The industry operates under an umbrella body, the Association of Kenya Insurers (AKI),  established in 1987. It was before then called the Insurance Association of Eastern Africa. Membership to AKI  is open to any registered insurance company in Kenya. Its main objective are to:

• promote prudent business practices
•  create awareness among the public
• and accelerate the growth of insurance business in Kenya.

At the top of the insurance sector are two reinsurance companies, the quasi-public Kenya Reinsurance Corporation (Kenya Re) and East African Reinsurance Company. By 2010 as a nation we had 44 short and long-term underwriters, of which 21 provide medical insurance. Others include 3,788 insurance agents and 158 insurance brokers.

Kenya’s insurance assets grew by 2.1 per cent to Kshs181.2 billion. Net premiums rose by 33.1 per cent to Kshs85.4 billion and general insurance claims by 30 per cent to Kshs28.l billion.

Under the 2011 amendments to the Insurance Act, any insurer wishing to open a branch of business in Kenya applies to the Authority for approval and further advice.

IRA now holds directors of the insurer to be jointly liable for the recovery of the assets in case of mismanagement. The Authority has power to manage assets of an insurance company in the public interest and take any other action in this regard.

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