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Insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. It is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange of a premium. An insurer, or an Underwriter, is a company selling the insurance; the insured, or policyholder, is the person or entity buying the insurance policy.

An insurance policy is vital for the purpose of transferring insurable risk from oneself to a risk carrier i.e. an insurance company. All of us are exposed to risk in our day to day lives, however, our level of awareness regarding our situation and the method of managing risk is generally low. Risk of hospitalization costs, accidents at home or in motor vehicle, damage to our homes, burglary and loss of property, income interruption for the family as a result of demise of breadwinner(s) are common insurable risks to which individuals are exposed. Businesses are exposed to fire and related perils risks, income interruption as a result of fire, damage to property among others. If a risk is not transferred to an insurance company then the individual or firm assumes the risk themselves deliberately or by default and in the absence of setting aside sufficient funds to deal with the eventuality of the risk there would be danger of detrimental financial consequences arising.

An insurance policy should be taken at the earliest available opportunity after the risk has been identified and its consequences quantified. Assistance in the identification of risk, quantifying the consequences of the occurrence of the risk, and the most suitable policy for addressing the risk is available from an insurance company, insurance agent or insurance broker.

Generally, insurance policies are issued for one year. However, in certain cases, policy can be issued for less than one year also at short period premium rate.

The amount to be charged for a certain amount of insurance coverage.

There are tariffs of some classes of business available in the country. Association of Kenya Insurers also advises premium rates of certain classes of business. The market guides some rates. The office of Insurance Regulatory Authority decides Motor Premium rates and premium rates for Customs Bonds, Performance Bonds and Advance Payment Bonds.

Premium has to be paid at the inception of the cover according to Provisions of the Insurance Act.

Excess, also called deductible, is the first amount of the claim which the insured has to bear. For instance in a Motor claim with a total repair cost of KES 300,000 if the policy has an Excess of 10%, the insured (customer) pays 30,000 and the balance is paid by the Insurance Company.

The sum insured is the value of the property declared for insurance or the maximum liability of the insurance company for settlement of claim against loss/damage.

Indemnity is the compensation paid by the Insurance Company to the Insured in case of an admissible claim under the policy.

It depends on the type of insurance and the properties to be insured. For example, if you want to insure:

  • Motor Vehicles: The vehicles should be insured for the present market value ie. the price at which the vehicle can be sold in the market.
  • Buildings: The buildings can be insured either for the present Market value, (excluding the value of the land) or for Replacement cost. Replacement cost refers to the value of the building if new.
  • Machinery: The machinery can be insured for the present Market value, or for Replacement cost. Replacement cost refers to the value of a similar machinery if new.
  • Stocks: The sum insured shall represent the maximum value of stocks in a particular place at any one point of time during the period proposed for insurance. Stocks shall be insured on the market value basis. If it is a seasonal business, then the same can be insured subject to "declaration basis". Under the declaration policy, the value of stocks held shall be declared on monthly basis, and at the end of the year, the average value is arrived at and the premium is adjusted accordingly, subject to certain conditions
  • Office Equipments: The office equipments can be insured either on market value or for Replacement cost. Replacement cost refers to the value of a similar equipment if new.

If the sum insured is less than the market value at the time of loss, then condition of average will apply.

If at the time of loss, the sum insured is less than the market value, the claim amount payable shall be reduced proportionately as the sum insured bears to the market value.

You can take the policy subject to Escalation clause subject to payment of additional premium.

The sum insured increases on daily basis up to the maximum percentage at the end of the year. For example if the policy is subject to 10% escalation clause and the total sum insured is Kshs.365 million, then the sum insured is deemed to be increased by 100,000 every day. If accident takes place on the 10th day of taking out the policy, the sum insured is deemed to stand at Kshs.365 million + Kshs. 1m (@100,000 for 10 days).

Actual Cash Value basis is used for policies where the owner is entitled to the depreciated value of the damaged property whereas Replacement cost is used for policies where the owner is reimbursed an amount necessary to replace the item with one of similar type and quality at current prices.

Notify Soin Insurance as soon as possible. Complete a claim form and submit it together with all other supporting documents.

Why should I use an agent/broker to purchase insurance? Utilising the services of an insurance broker can save you time and money. Insurance brokers are rigorously trained, regulated and monitored by AIBK to ensure you receive the most accurate, appropriate advice for your needs. When arranging insurance without dedicated professional advice, many people take shortcuts and fail to understand the policies they are purchasing, not knowing whether they are getting value for money.

Often they are disappointed when their insurance doesn't respond in the way they believed it should. Whether it's home, car, life or business insurance, an insurance broker can provide advice and assistance to make sure you are properly protected. Because insurance brokers deal with a range of insurance companies, they have access to a range of different policies. Brokers will be aware of the benefits, exclusions and costs of competing policies on the market. They will also help arrange and place the cover and can often provide advice on how to make the most of your insurance budget. Going direct to an insurance company may appear cheaper, but without the specialist interpretation and tailoring to your specific needs, going direct may well turn out to be an extremely expensive exercise. Using an insurance broker can even cost you less because brokers have knowledge of the insurance market and the ability to negotiate competitive premiums on your behalf. A broker will also explain your policy and any special situations you need to watch out for.

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