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Savings/Stocks/Land vs Insurance Education Policy
Zichi
#1 Posted : Wednesday, May 24, 2017 11:36:40 AM
Rank: New-farer


Joined: 5/24/2017
Posts: 44
Hello good people,

I have been approached by various insurance companies with regard to taking up education policies for my child. I have done a simple analysis, for example with Britam's Super -E Plus comparing what they propose as returns in a 15year period for a monthly payment of Kes 20000 and it falls short of one would receive if they even decided to just deposit the amount in the bank with 0% interest. I have also factored in present value of the returns using the average inflation rate and still am not convinced.

Could anyone open up my mind on how these policies work and if they are really worth it?
actuarywahisa
#2 Posted : Wednesday, May 24, 2017 3:10:27 PM
Rank: Member


Joined: 5/21/2014
Posts: 184
Zichi wrote:
Hello good people,

I have been approached by various insurance companies with regard to taking up education policies for my child. I have done a simple analysis, for example with Britam's Super -E Plus comparing what they propose as returns in a 15year period for a monthly payment of Kes 20000 and it falls short of one would receive if they even decided to just deposit the amount in the bank with 0% interest. I have also factored in present value of the returns using the average inflation rate and still am not convinced.

Could anyone open up my mind on how these policies work and if they are really worth it?


I used to sell the Education and other life policies.

From a return perspective, the amounts are negligible and stocks or land offer a better return.

However you should view it as a pure savings plan with life cover as the main thing as opposed to viewing it as an investment. In fact as soon as an agent approaches me and mentions education cover and investment returns in the same sentence, that marks the end of our meaningful conversation. It means that they either don't know what they are selling or are trying to fool me into buying by offering false promises.

Maybe a quick comparison,


Depositing the cash in a bank:
It won't give you a cover on your life, let alone a good return. It will however be accessible to you fairly quickly. There may be a great temptation to dip into the cookie jar before reaching your goal and this endangers

Land: Superior return in the long run but unless you take a loan (which will have a life cover and possibly a retrenchment cover to secure it) and then repay the loan using the monthly amounts of KES 20K, you won't be able to invest immediately in the land and so you'll miss out on return in the meantime and there won't be a cover on your life as you are saving up the amount to afford the land and transfer costs. Then of course you will need to ensure that you are dealing with clean land, otherwise your money could vanish in the blink of an eye.

Stocks: Good potential returns. You'll possibly need to learn to trade unless of course you give your funds over to a fund manager or buy into an equity fund. Again you'll not get a cover on your life in the event of untimely death.

Life Policy (Education/ Savings policy): Bad investment return sometimes even negative when adjusted for inflation. This is not necessarily a bad thing because the amount which would have been received in the form of returns is used to give you a life cover. Once the policy is running there is an immediate cover on your life in the event of untimely death.

I prefer to view them all as important as each has features that the other doesn't have. So it shouldn't be an 'either/or' situation.

You may want to consider puting together a portfolio with several of the options if not all. The option you decide to start with will depend on your aversion to risk.

Ultimately the best item to throw into your basket first will depend on a lot of other personal factors. Build a plan for the long term.

The list of options is in no way exhaustive. I would be happy for you to buy me a beer.

wachden@gmail.com
There are too many opportunities all around. Open your eyes and maybe you'll spot one
Zichi
#3 Posted : Wednesday, May 24, 2017 6:56:42 PM
Rank: New-farer


Joined: 5/24/2017
Posts: 44
actuarywahisa wrote:
Zichi wrote:
Hello good people,

I have been approached by various insurance companies with regard to taking up education policies for my child. I have done a simple analysis, for example with Britam's Super -E Plus comparing what they propose as returns in a 15year period for a monthly payment of Kes 20000 and it falls short of one would receive if they even decided to just deposit the amount in the bank with 0% interest. I have also factored in present value of the returns using the average inflation rate and still am not convinced.

Could anyone open up my mind on how these policies work and if they are really worth it?


I used to sell the Education and other life policies.

From a return perspective, the amounts are negligible and stocks or land offer a better return.

However you should view it as a pure savings plan with life cover as the main thing as opposed to viewing it as an investment. In fact as soon as an agent approaches me and mentions education cover and investment returns in the same sentence, that marks the end of our meaningful conversation. It means that they either don't know what they are selling or are trying to fool me into buying by offering false promises.

Maybe a quick comparison,


Depositing the cash in a bank:
It won't give you a cover on your life, let alone a good return. It will however be accessible to you fairly quickly. There may be a great temptation to dip into the cookie jar before reaching your goal and this endangers

Land: Superior return in the long run but unless you take a loan (which will have a life cover and possibly a retrenchment cover to secure it) and then repay the loan using the monthly amounts of KES 20K, you won't be able to invest immediately in the land and so you'll miss out on return in the meantime and there won't be a cover on your life as you are saving up the amount to afford the land and transfer costs. Then of course you will need to ensure that you are dealing with clean land, otherwise your money could vanish in the blink of an eye.

Stocks: Good potential returns. You'll possibly need to learn to trade unless of course you give your funds over to a fund manager or buy into an equity fund. Again you'll not get a cover on your life in the event of untimely death.

Life Policy (Education/ Savings policy): Bad investment return sometimes even negative when adjusted for inflation. This is not necessarily a bad thing because the amount which would have been received in the form of returns is used to give you a life cover. Once the policy is running there is an immediate cover on your life in the event of untimely death.

I prefer to view them all as important as each has features that the other doesn't have. So it shouldn't be an 'either/or' situation.

You may want to consider puting together a portfolio with several of the options if not all. The option you decide to start with will depend on your aversion to risk.

Ultimately the best item to throw into your basket first will depend on a lot of other personal factors. Build a plan for the long term.

The list of options is in no way exhaustive. I would be happy for you to buy me a beer.

wachden@gmail.com



Thank you for the extensive answer. I appreciate it. As for the beer, I owe you one
snifadog
#4 Posted : Wednesday, May 24, 2017 7:41:27 PM
Rank: Member


Joined: 6/6/2016
Posts: 165
Location: Nairobi
i have been in the insurance industry, education policies from different insurers vary quite wideliy, some offer a lot more protection/insurance than others similarly for returns. I very much doubt that they are worse than keeping the cash in a bank at 0%. they also offer tax relief and some guarantee a minimum return around 6-9% pa. I have done a quick search and the first website gives a quote with returns reasonable. as mentioned, the best advice is to balance your portfolio, an insurance policy is however an important yet often neglected part. here is the quote website https://www.pesabazaar.c...n-insurance-policy-quote
tandich
#5 Posted : Thursday, November 01, 2018 11:08:13 AM
Rank: Member


Joined: 5/6/2008
Posts: 199
Why not get a pure life/term assurance policy to provide for dependents? Much cheaper. Agents don't push for them as much because they get lower commissions
kayhara
#6 Posted : Thursday, November 01, 2018 11:35:33 AM
Rank: Veteran


Joined: 5/5/2011
Posts: 1,059
Don't fall for those education polices, they are just scams, the returns are minuscule I would rather invest the money myself, better still get units trusts you can get better value than the polices,actually never invest in an insurance company in Kenya
To Each His Own
tony stark
#7 Posted : Thursday, November 01, 2018 11:52:15 AM
Rank: Veteran


Joined: 7/8/2008
Posts: 947
Clearly you are in the know.
So what happens when someone stops paying mid way. Why does the "investment" disappear and the insurances refuse to return the money with or without penalties.

actuarywahisa wrote:
Zichi wrote:
Hello good people,

I have been approached by various insurance companies with regard to taking up education policies for my child. I have done a simple analysis, for example with Britam's Super -E Plus comparing what they propose as returns in a 15year period for a monthly payment of Kes 20000 and it falls short of one would receive if they even decided to just deposit the amount in the bank with 0% interest. I have also factored in present value of the returns using the average inflation rate and still am not convinced.

Could anyone open up my mind on how these policies work and if they are really worth it?


I used to sell the Education and other life policies.

From a return perspective, the amounts are negligible and stocks or land offer a better return.

However you should view it as a pure savings plan with life cover as the main thing as opposed to viewing it as an investment. In fact as soon as an agent approaches me and mentions education cover and investment returns in the same sentence, that marks the end of our meaningful conversation. It means that they either don't know what they are selling or are trying to fool me into buying by offering false promises.

Maybe a quick comparison,


Depositing the cash in a bank:
It won't give you a cover on your life, let alone a good return. It will however be accessible to you fairly quickly. There may be a great temptation to dip into the cookie jar before reaching your goal and this endangers

Land: Superior return in the long run but unless you take a loan (which will have a life cover and possibly a retrenchment cover to secure it) and then repay the loan using the monthly amounts of KES 20K, you won't be able to invest immediately in the land and so you'll miss out on return in the meantime and there won't be a cover on your life as you are saving up the amount to afford the land and transfer costs. Then of course you will need to ensure that you are dealing with clean land, otherwise your money could vanish in the blink of an eye.

Stocks: Good potential returns. You'll possibly need to learn to trade unless of course you give your funds over to a fund manager or buy into an equity fund. Again you'll not get a cover on your life in the event of untimely death.

Life Policy (Education/ Savings policy): Bad investment return sometimes even negative when adjusted for inflation. This is not necessarily a bad thing because the amount which would have been received in the form of returns is used to give you a life cover. Once the policy is running there is an immediate cover on your life in the event of untimely death.

I prefer to view them all as important as each has features that the other doesn't have. So it shouldn't be an 'either/or' situation.

You may want to consider puting together a portfolio with several of the options if not all. The option you decide to start with will depend on your aversion to risk.

Ultimately the best item to throw into your basket first will depend on a lot of other personal factors. Build a plan for the long term.

The list of options is in no way exhaustive. I would be happy for you to buy me a beer.

wachden@gmail.com

tony stark
#8 Posted : Thursday, November 01, 2018 12:00:02 PM
Rank: Veteran


Joined: 7/8/2008
Posts: 947
kayhara wrote:
Don't fall for those education polices, they are just scams, the returns are minuscule I would rather invest the money myself, better still get units trusts you can get better value than the polices,actually never invest in an insurance company in Kenya


Got burnt with these nonsensical things! Never ever.
These education policies scams are a form of multilevel marketing. Here is a simple counter to all the lies they purport
1. If you die your childrens education will be covered. That's fine but if I die then they should ideally have access to all my resources that included the nest egg I am creating for my retirement. I wont need this nest egg since I'm dead anyway so wouldn't worry about my children's education.
2. It forces you to save.
Okay. There are many ways to save... park it at cytonn, mutual funds, t bills, etc. Those are all better saving methods that are hard for you to access the money.
3. You will be able to afford better schools saving through these schemes .... Laughing out loudly Laughing out loudly Laughing out loudly Laughing out loudly . The lies Jesus help these thieves!

Never ever falling for this trap. Having burnt a few hundred thousands on this things .... I cry!
Gee Clods
#9 Posted : Monday, September 23, 2019 10:41:26 PM
Rank: Hello


Joined: 3/18/2014
Posts: 4
Location: Nairobi
tony stark wrote:
kayhara wrote:
Don't fall for those education polices, they are just scams, the returns are minuscule I would rather invest the money myself, better still get units trusts you can get better value than the polices,actually never invest in an insurance company in Kenya


Got burnt with these nonsensical things! Never ever.
These education policies scams are a form of multilevel marketing. Here is a simple counter to all the lies they purport
1. If you die your childrens education will be covered. That's fine but if I die then they should ideally have access to all my resources that included the nest egg I am creating for my retirement. I wont need this nest egg since I'm dead anyway so wouldn't worry about my children's education.
2. It forces you to save.
Okay. There are many ways to save... park it at cytonn, mutual funds, t bills, etc. Those are all better saving methods that are hard for you to access the money.
3. You will be able to afford better schools saving through these schemes .... Laughing out loudly Laughing out loudly Laughing out loudly Laughing out loudly . The lies Jesus help these thieves!

Never ever falling for this trap. Having burnt a few hundred thousands on this things .... I cry!


I took super E plus 3 years ago. Consistent coercion by a friend with all the lies till I believed.

Now I am considering exit options. The insurance policy does not make sense. I guess, I am waking up now.
Acquitting the guilty and condemning the innocent — the Lord detests them both
NewMoney
#10 Posted : Tuesday, September 24, 2019 12:00:50 AM
Rank: Member


Joined: 3/1/2019
Posts: 170
Location: Nairobi
Insurance policies can still be recommended to anyone who is struggling financially due to bad saving habits, believe it or not over 50% of us fall into that group. This one will help you have something for your kids which is better than nothing.

Now for the rest of us who can commit to a savings and investment plan, I agree with you guys that it won't make sense to choose to put your money in life/education insurance. Medical insurance is a must though, for everyone.
MugundaMan
#11 Posted : Tuesday, September 24, 2019 8:26:43 AM
Rank: Elder


Joined: 1/8/2018
Posts: 2,211
Location: DC (Dustbowl County)
Investing in land, and more specifically in DC is the ONLY way to go if you are a serious person. It's the only true horse in the race. Hizo zingine zooote ni punda. Ignore my advice at your own peril.

tom_boy
#12 Posted : Tuesday, September 24, 2019 9:48:35 AM
Rank: Member


Joined: 2/20/2007
Posts: 767
tandich wrote:
Why not get a pure life/term assurance policy to provide for dependents? Much cheaper. Agents don't push for them as much because they get lower commissions


Kindly rephrase that, agents actually pretend that pure life / term covers do not exist.

Insurance is to cover for loss. Get a term life insurance and personal accident / health cover. Throw the rest of your cash into investments.
They must find it difficult....... those who have taken authority as the truth, rather than truth as the authority. -G. Massey.
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