If you are like most people, the word insurance probably brings back bad memories. I mean, we only take insurance cover when it’s really important or when it’s a legal requirement (e.g. car insurance). But did you know that you can actually use insurance to grow your wealth? Most people have overlooked or are plain unaware that insurance companies provide some risk-free plans for wealth creation. Here in Kenya, these are some of options you can pursue.
Insurance companies are always looking for money to invest in different projects e.g. real estate and treasury bills. Through unit linked policies, they collect your money and pull it together with other funds and invest it in bulk. The company then appoints a trained and experienced fund manager who will make investment decisions on your behalf. If your fund manager makes some pretty good decisions that grow your pool of funds fast, then you also get to reap handsomely. An example of a unit trust investment option is one offered by UAP Old Mutual Company and Britam.
2.Collateral For Loan
If you hold a whole life insurance policy, you can simply use your policy as security for loans. This can be a plus especially if you don’t own tangible assets like land and motor-vehicles or when your other assets are tied up somewhere due to another loan. To a small investor, the opportunity of accessing an additional financing can make things a tad better especially when one is struggling to marshal up resources.
3.Money Market Fund
Money market funds are almost similar to unit trusts only that while the former offers fixed income while the other offers a variable one. Put simply, if you put Ksh100,000 in a money market fund offering an interest rate of 7% per year, you are assured that you will get your money plus interest rate at the end of the maturity period. However, when you invest in a unit trust deal, your interest rate may vary depending on how your fund manager performs. The Britam Money Market Fund is a good example that’s locally available.
In Kenya, holders of life policies receive a tax relief of 15% of premiums paid under the taxation year. Subtracting this from your premiums means the premiums paid are usually 85% of the quoted price. In a life where every cent matters, this 15% exemption can translate to much-needed savings which you can use to fund other important aspects of your business.
5.Loss Mitigation (Non-Life Insurance)
Ultimately, insuring your business can help protect it no matter how small it is. Unfortunately, most small business owners see insurance as an added burden they would rather live without. But let me take you back to 2015 when the Gikomba market fire strategy shook the country. Those who had taken up insurance cover were reimbursed to the tune of Ksh 90 Million. Those who hadn’t taken insurance lost everything – as a result hard-earned cash and years of sweat went down the drain. The Kenya Orient Insurance Limited is a good example of an insurance company that works with small business owners.
Although investing in insurance is by no means a get-rich-quick alternative, the truth is that if used wisely, it can provide that much-needed competitive edge to your business. The world’s best investors know this, which is why they keep growing their wealth no matter what challenges they go through.
Hillary Chepkoi is passionate about insurance matters. He can be reached through hchepkoi(at)gmail(dot)com.