What Type of Insurance Do I Really Need?

Written by Wellington Ayugi

A few days ago we were having discussions in the office on whether having some form of insurance was necessary. One of my coworkers was insistent on how life insurance policies were the only type of insurance anyone should have. Others felt that car or health insurance was more important and you could do without the rest. To me, the conversation was a subtle reminder that I still wasn’t sure on what type of insurance I actually wanted.

I decided to do some digging on the topic of insurance and came up with some interesting information. Before I share them I must first explain what the concept of insurance is all about. Insurance in simple terms is paying a lump sum to safeguard against a risk or incident of a large magnitude. That being the case, insurance can be a tricky affair.

There are many specific forms of insurance out there which you may never need. So don’t feel bad next time you watch a television ad telling you that you need a specific type of insurance, some special type of medical or car insurance, or more life insurance than you already possess. Let’s try to narrow things down so you know what you need, and you have the necessary resources to look for the different types of covers that are applicable to you.

Insurance covers everyone should have

Let’s begin with the types of insurance everyone should have regardless of their personal circumstances and where they live:

  1. Motor insurance – If you don’t drive or own a vehicle, then you can ignore this one. If you do you should at least have the minimum car insurance coverage required by the State. In Kenya the minimum cover a driver must have is third party insurance, which covers the other party from loss, bodily harm or death caused by your car being involved in an accident. However, this policy does not require you have enough for your own damage repairs, or to cover against other infractions, rental cars, fender benders and other challenges. It is advisable you find out the extent of your third-party cover from your insurance provider and compare it to what you actually need. You may need to get a comprehensive cover so you can have more items insured and protect your car from unpredictable risks.
  2. Health Insurance – This is an important one. Whether you get it through your employer, through a labor union or association, or through the Government’s health insurance scheme (NHIF), quality healthcare will allow you to see a doctor when you are sick, buy prescription medicine, get a routine check up, or get emergency medical care if you have a sudden illness. NHIF is mandatory for Kenyans in formal employment though it is not without its challenges, such as late reimbursements. As a consequence, some people will take out a private insurance for additional medical cover to what NHIF offers. Your health is your most vital asset and health insurance can make you preserve it.
  3. Life Insurance – This is one of the more important forms of insurance, yet it often gets overlooked. While the uptake of life insurance in the country has been low, recent legislative and regulatory changes are improving Kenyans perception of this type of insurance. Life insurance is meant to financially assist your spouse, children, or parents in the event of your death. Normally, it should help cover funeral expenses or at least provide short-term income for your loved ones so they can recover financially after your passing. When you are young you may not think about life insurance, but once you get older you should at least get it.
  4. Homeowner’s insurance – Owning a home can be quite expensive and thus you should have some form of property insurance that covers your belongings in the event of a burglary, fire, weather event or natural disaster. Some lenders or mortgage companies will insist you have homeowner’s insurance before they can extend credit to you. Depending on your insurance provider, normally excluded items such as damage caused by floods may be included at additional cost.

These four types of insurance are the most common and I recommend everyone should have them. You can be excused from having car insurance if you don’t own a vehicle, or homeowners insurance if you live with your parents or family. If you are an adult you should at least consider one or two of the above, for your personal protection and of those you love.

Additional types of insurance for you to consider

That being said, these are not the only insurance options available for you to consider. Depending on your particular situation, age, and occupation here are a few you can think about:

  • Whole life insurance – This is strictly an insurance policy that pays out to your loved ones if you pass away the same way term life does but has the added benefit of paying you back it the duration of the policy lapses and you are still alive. You can also enjoy a medical cover and it can be borrowed against.  If you opt for this route make sure you talk to your insurance provider and are clear on the premiums (which can be high), return on your investment and the terms of the contract.
  • Travel insurance – While it is generally deemed as unnecessary, travel insurance can be useful should something go wrong with your holiday or overseas trip. The cover can provide money to replace stolen or misplaced items, deal with medical expenses when you are out of the country, or even help you re-book a flight should it get canceled. Before you get travel insurance ensure your current health policy does not cover medical costs when abroad, this way you can save money.

These are just a few types of insurance you may have seen advertised on television, or on a billboard. While I’m not saying you should go and get them also, you can study the policy details and compare them to your current policy, to eliminate any possibility of a policy overlap.

Begin with the first four and afterward move to the others. While there are a lot of insurance products in the market, once you know the basics, learning about the rest should be easy. All the best!

About the author

Wellington Ayugi

Wellington Ayugi handles Business Development at Covered and has a passion for personal finance, microfinance, and developments in financial technology