Prioritise needs before taking up insurance cover

As a result of limited resources and the need to have adequate insurance coverage, the issue of priority comes in guidance of what kind of cover one needs. FILE 

By Isaiah Opiyo

In Summary

• The process of signing up for insurance coverage should begin with needs analysis and identification.

In our daily endeavours, we are usually surrounded by all kinds of risk. The number of risks is countless and the magnitudes are unimaginable.

To protect ourselves from any financial loss that would result, it is advisable to secure an insurance cover.

Although the risks are many, it does not necessarily mean that one should sign up for all the insurance covers available in the market in order to be safe from uncertainty. This is because the insurance service comes at a cost.

As a result of limited resources and the need to have adequate insurance coverage, the issue of priority comes in guidance of what kind of cover one needs.

From my daily encounter with clients, I have observed that many income earners rarely have any basic idea on how to set their priorities when securing their insurance plans.

A unique case is where Linnet*; a parent of a 10 year-old girl bought a child funeral cover instead of an education cover- in place to meet any funeral costs that may arise in case of untimely death.

While many could be conversant what insurance is all about, the issue of profiling and prioritisation of needs is an area that has seen many clients end up with covers that are not of priority to their personal financial plan.

The process of signing up for insurance coverage usually begins with needs analysis and identification, profiling and prioritisation of needs (risks), determination of sufficient sum assured and lastly evaluation of affordability of quote premiums.

Because of this process, insurance companies have developed various products targeting different kind of risks to provide consumers with a variety of choice when seeking coverage.

The primary purpose of insurance is to provide financial protection to the policyholder or his dependents against a financial loss that would occur in the event of the insured risk.

Since a child has no financial income, there is probably some pain but no financial loss that would result in the event of risk except that related to the medical expenses.

This clearly shows that in taking up an insurance cover for or on behalf of a child, as a matter of priority, education cover comes first before a life insurance cover, accident cover and even child funeral cover.

You as the premium payer or the parent, you are not dependent on your child’s income, so it beats the priority of purchasing life insurance on a child.

The type of an insurance cover that you need will depend on many factors. Your emphasis of taking up a cover should be to enable your family or dependents maintain their standard of living but not about making your family rich.

Your personal circumstances will comprise the financial needs of your family and dependants, your occupation, your financial obligations, how much debts or liabilities that you owe.