How insurance companies are ripping off parents in Africa.

Hey there,

It is that time of the year where you look at your baby and he is about to join school and you remember you saw something about education policies somewhere. Then you decide to save for the future, one thing I have realized though is insurances are ripping us parents off our money and most of us do not have the knowledge, time or patience to sit down with a calculator and do the math or simply just ask them, enhee! So what am I gaining? Because for sure they are gaining, ALOT! Some insurance companies may not like me much after this but one of our purpose is to elevate the parents. At least thank me for this specific post, I will not expose the names, maybe in the next one :* If you are a parent and have taken an insurance policy, take out your policy and a calculator and just follow through. If you haven’t taken one, thank me later.

Shall we?…

 

Let us do the calculation for an education plan from one insurance company.

If you were to save 3,000shs every month by yourself for 15 years, at the end of the 15 years you should have a total of 540,000shs in your piggy bank or bank account right?

But if you put your money in this specific insurance company under an education policy, at the end of the 15 years they will have given you a total of 831,858kshs. If you are investing with them 3,000shs per month for the next 15 years. Up until there we are together, yea?

So in this instance you are gaining a profit of 291,858 by putting your money in an insurance company. Now this is investment. This money could push you through a few terms/years depending on where your kid is schooling in.

Another thing I want to draw your attention is the amount of interest that you get yearly from this specific policy. So how you are going to calculate this is.

You take the profit which is 291,858k and divide it by the amount you would have gotten if you saved by yourself which is 540k. You get 0.5404. Then multiply this by 100 percent. You end up with 54.04. Divide this number by the number of years, which in this case is 15years. You get 3.6% so your money is earning you 3.6 percent every year from this specific policy.

I then went ahead and looked at the same education policy, in the same company, same amount but a shorter period of time which was 12 years.

The amount at the end of 12 years knows as the maturity estimate was 591,607.

So I followed the same steps again, if I save el solo I will have 432k at the end of 12years. So I gain a profit of 159,607k. Still good money.

If you continue with the calculations as above I got that I am getting an interest of 3.07% per year on my money.

So if you only had these two options of the 12 year and the 15 year plan. The 15 year one is better for you because it gives you a greater interest on your money.

I was so excited with the figures that I decided to look at other policies such as an investment plan to see if I will be able to pay for my son’s education policy and start something on the side. I looked at their investment plan for 10 years, saving the same amount of money and got that the end of 10 years I get a maturity estimate of 512,683.20kshs. A profit of 152,683kshs and the interest on my money is 4.2%. Ladies and gentlemen, it is higher 😀

Looked at the same investment policy for 15 years and I was getting a maturity estimate of 917,504kshs. A profit of 377,504kshs and the interest in this case is 4.6%. Higher again than the education policy interest on the same number of years by a whole 1%.

Advice:  You could take the investment plan for 10 years with this insurance company. At the end of your ten years get the 512,683k and go to another insurance company that is amazing in terms of fixed deposit accounts, because they give a percentage of 12 percent yearly on your money or if you get somewhere secure with a higher percentage than 12, go with that and get more cash at the end of 15 years as opposed to ending up now with the 917,504kshs at the end of 15 years you can have 1million Kshs. That could save you when it comes to school fees. The more money you save the more cash you get in terms of returns for sure and vice versa. The reason I liked the investment is they give you the total amount at the end of 10 years mara moja. I am then assured of not spending it in bits.

If you are like me you would want to go with the one that yields your money most returns.  Unless you are just about the saving discipline and in that case then you can go with any as long as it earns you interest at the end of the day even if it is 0.2 per year.

insurance

I will tell you this for free, based PURELY on my research and calculations.

  1. Do not invest in an insurance company that is not telling you the amount of accrued bonuses they will give you on the date of maturity. Because they may be lower than what you are getting by saving by yourself. This is what I mean, some companies will give you a total of the sum assured plus the bonuses and put a disclaimer that you will receive certain percentages of the sum assured throughout the years say at year 4 get 20%, year 6 another 20% like that like that. These percentages are what I am calling bonuses. Then during the maturity date which is the 15th year they give 100percent sum assured, and promise plus an accrued percentage which they are not stating a specific percentage. Bear in mind the percentage may be 2 or 5 or even 1. So do not fall that they will give you higher than 10% if they have not stated it in the policy document. For the insurance companies I did calculations on with such a disclaimer I found that if I save by myself I gain between 60k and 100k and if I save with them I lose that amount because unless the accrued bonuses is higher than 30 percent, they end up with about 40k of mine. In short I have saved with this insurance company for over 15 years only to give them 40k. Therefore if they do not tell you the percentage do not fall for such.  So do this add (sum assured plus all those bonuses) then minus from the amount you get by saving solo. You will see that there is a negative figure. That my dear parent is what you call not investing.
  2. Please do the above calculation for an education policy before you take it. Sadly there is an insurance company that will end up giving you 50k at the end of 10 years and that is just 5k per year. If you look at it monthly, that is 416kshs in a month compared to one that will give you 1,600 per month for the same amount. In this do not let the agent tell you or guide you, it is your money. Just do it by yourself! Their aim is to sell, true and your aim is to make money and my aim is to elevate you! In this case sadly, your needs before theirs.
  3. Insurance is good. Did you know it exempts you from paying a certain percentage of tax monthly? Amazing right? So you are not only gaining on the money part but you are also getting tax exemptions.
  4. If you die, your next of kin still gets the sum assured and in some insurances the bonuses of that specific year. Some just pay for you and your next of kin benefits anyway. In my case my baby gets the entire mullah. This applies even in instances of incapacitation.
  5. If you do not believe me, take out your insurance policies in the bedroom and look at the figures and calculate for yourself :). I will not disclose the best insurance in terms of education policies in town is because they are not paying me to do the blog post for them but I want to urge you to calculate because I found them and I am putting all my money with them 🙂 you will be surprised some of us are getting 1% from some of the “best” insurance companies.

See you at our next event, mark the date 20TH AUGUST! FAMILY FUN DAY! FOR ALL!

HAPPY INVESTING!!

<3

Fi.

 

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