INSURANCE BASICS 101

Insurance Basics : 5 Terms Every Person Should Know

Did you know that insurance penetration in Kenya was only 2.34% in 2021, according to the Association of Kenya Insurers (AKI)? This low uptake suggests many people still don’t fully understand the benefits of insurance—or how to get started.


Key Terms:

Premium - The amount you pay (monthly, quarterly, or annually) to maintain your insurance coverage.

• A lower premium often means less coverage, while a higher premium might offer more benefits or lower out-of-pocket costs in the event of a claim.


Sum Assured - The maximum amount an insurer will pay out if you file a valid claim.

• Ensuring you have adequate coverage protects you and your loved ones from financial strain in emergencies.


Policy Term - The duration for which your policy is valid. It could be a fixed term (e.g., 10 or 20 years for endowment policies) or open-ended for some health or life insurance plans.

• A longer policy term may offer benefits like savings or bonuses, especially with endowment plans.


Deductible / Excess - The amount you must pay out of pocket before the insurance company covers the remaining costs.

• Understanding your deductible helps you plan for any upfront costs when making a claim.


Beneficiary - The person(s) who receive the policy’s payout if an insured event (like death) occurs.

• Updating your beneficiaries ensures your payout goes to the right people.

It is important to understand these basics in order to ensure you pick the right policy and avoid under-insuring.


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