Salient Factors to Consider Before buying Life Insurance


Fraternal greetings to ALL ZIFA Executive, members, family and colleagues. We hope and pray that you are all safe during these difficult times.

Thanks Mr. President and your Executive members for this great initiative regarding Life Insurance proposal. Way to go. I just wish to highlight and share few salient points pertaining to the task ahead of us.

As we all know, choosing a life insurance company is not a simple task especially for many of us who were born and bred, grew up in Zambia. Reasons vary depending on our Zambian historical background, upbringing, beliefs, myths, traditional way of life and living with extended family members, our way of life, cultural, social, financial arrangements and economic considerations.

Be that as it may, we are all alive to the fact and reality that in diaspora, consideration and great need to have life insurance arises given the historical perspective, responses and performances of the “GO FUND” initiatives of the yester months and years. I will try to be brief.

There are several important things worth considering for everyone at the personal and family level in order for the proposed process of Life Insurance to run smoothly. Buying insurance is a huge long-term commitment. From the moment you start paying for it, you’ll need to sustain it anywhere and consistently for one or two decades (10 to 20 years and beyond) from now if God wishes you to continue roaming the surface of this Earth for much longer.

With so many different life insurance companies to choose from, both large and small, it may be confusing and probably overwhelming to settle for and choose one on a personal level. This is how ZIFA Comes in handy.

  1. What is the Life Insurance company’s financial stability, strength and ability to meet their insurance policy and contract obligations? Policy Holders need to know how A.M. Best, Fitch Ratings, Moody’s, Standard & Poor’s Ratings are of such an insurance company. COMDEX score can equally assist us in knowing the aggregate data on financial stability of all life insurance companies. The Stories of Madison Insurance Company in Zambia are still fresh. So, kindly assist members know the potential Insurance company.
  2. Policy holders need to know the Paying Ability. Understanding what the company’s reserves are is critical in any decision making. In a layman’s language, the company must balance their cash reserves with investment income from premiums to pay claims and still make a profit. For example, Because of Wallstreet Trading and shares fluctuating nowadays, threat of minor recession, the 401k holders and other Insurance company holders may have recently lost out some money because of stocks tumbling down during this COVID -19 period. In short, the Insurance company loses too much money through investment activities or claims made, it should have enough reserves to protect them so they can pay their debts. These reserve requirements of between 10 and 12 % of revenue are typically written into law with the intent of protecting the consumer. Luckily, within the USA, the State guaranty funds will pay claims up to a certain limit in the unlikely event that our potential insurance company goes under, fails or collapses. We can check the National Organization of Life & Health Insurance Guaranty Associations, (NOLHGA) to find Florida State Association.
  3. Conversion Options and Privileges. Most of the life insurance policies that are sold are term policies, providing coverage at a fixed rate for a set amount of time, hence the name term. Again, in the lay man’s language, if a Zambian living in Florida aged 30 years old takes up a life insurance Policy now in 2020, it means that in 2050 when that Zambian turns 50 years, the Policy ENDS and that’s it. With standard term life insurance, it implies that Zambian policyholder outlives a 20-year term, or the life of that policy, the contract runs out in 2050. The Life insurance company simply keeps the premiums paid. Kwamana, Kwasila, Chapwa. The Policy holder may not claim anything back. He or she at 50 years will have to START another separate policy to run up to 70 years. Efyo Chaba fye.

Here is my Caveat and consolation though which is good for all of us to hear. Term life insurance is a safeguard against the unexpected. It’s a great option for young families, but it’s built primarily as temporary insurance. It’s a fraction of the cost of a more permanent option like variable life, whole life, or universal life. It is typically not intended to pay out like a long-term policy. Some term life insurance policies have a conversion feature that lets you change your term policy to a permanent policy, like a variable, whole, or universal life. These types of policies are set for the entire lifetime of the policyholder and provide guaranteed premiums and cash values that grow from one year to the next. Having a conversion feature as part of your life insurance policy is important because it allows you to change your policy without having to take a medical exam or to re-qualify.

Determining how much and what kind of insurance one should buy is one of the most important financial decisions you’ll ever make. It’s also one of the most complicated.

Given the above reasons, it would be prudent for the EXECUTIVE to kindly share with the ZIFA general membership well in advance at an appropriate time of course, the name of the Insurance Company under consideration so that we can review, analyze carry out among others due diligence regarding the following considerations;

  1.  Reputational risk and Financial Health of the Insurer under consideration. Their Credibility and a calculated risk assurance they are not at risk of going bankrupt any time soon. That they can meet their contractual obligations and provide the payouts as promised. Loved ones getting premiums back.

    2.    How the proposed Insurance Works. Several Zambians may have Insurance Policies. Knowing what the insurance protects them is another issue. Potential Insurance policyholders need to compare with the current policy they hold. They also need to be prudent and convinced why they may need to move away from or add on to the current monthly deductions. You will all agree that it is important for you to know what you are paying for, not the whole mechanics behind insurance like pricing, but to be aware of the different circumstances under which you can make claims on your insurance policy. This understanding helps a lot of people to get a clear idea on the kind of protection they need before they can commit to buy the type of life insurance being floated. Understanding how the proposed insurance works and circumstances under which you can make claims will also help those who already have one to avoid having overlapping coverage.

  2. Does the Proposed Life Insurance Suit the Needs of many Zambians in Florida? We note that similar proposals have been floated before, but several have not succeeded in implementation stage. Before we fall in the same old trap of such great initiatives not taking off, we need to interrogate some of fundamental questions ZIFA members may have had in shunning away from such financial commitment to buy life insurances. Questions like; how does this particular insurance plan fit into our needs? Every type of insurance plan is meant to offer financial protection for different aspects of our lives. As we all know, life insurance is not for our potential daily prescriptions or ER or hospitalization bills. Life insurance is meant to offer financial protection for your loved ones should a life changing event (e.g. accident or disability) or death take place. Zambians are urged to read and understand and be very clear about the purpose of owning the insurance plan and how it fits into their financial game plan.
  3. We all need to think About Protection Needs First, Then Consider Your Wants. The difference is not the same. The primary objective of buying insurance is for protection, especially for your loved ones. But most people find insurance both morbid and unexciting, especially when we are paying premiums without “seeing any real tangible benefits”. Thus, it is human nature to seek more exciting financial products like investments where we can see our money growing. However, insurance is a need, rather than a want. The Money invested in life Insurance Policy is not for you to enjoy at the Beach or Cruise Ship post COVID-19. It is meant for your loved ones – immediate family members once you pass on to the other side of the World. Little wonder Africans prefer to have Life Insurance through employers rather than take part of the personal income from the wallet and handbags, Ration, Groceries money and put it away in Life Insurance Policies. It is a Psychological warfare we need to win over. Lol.

    5.    Keeping Life Insurance Premium Affordable and avoid Overbudgeting. Amenshi balinga no Bunga (literal meaning that we need to correctly measure and know the amount of water to put in which pot in relation to the quantity of mealie-meal available in a bag before embarking on the envious process of making Nshima). That way, we will avoid coming up with an embarrassingly thin porridge instead of well-cooked and coordinated Nshima    Knowing the nitty-gritty earlier in the conversation will make ZIFA members consider whether they are able to afford the premiums. Because if one overcommits on their insurance budget, it can be detrimental to the financial game plan. Overcommitting on our insurance budget can lead to unwanted early termination of our insurance policy and we may end up losing out. This happens when people are unable to continue paying the premiums due to other financial constraints and commitments like housing, marriage, car loans, (For many of us in the Health Sector in Florida, a Client Dies), or even retrenchment during COVID-19 Disasters like these when people are on lock-down. Chayuma, ama Pockets yatulika. Handbag yapya. Naikabafye. Coffers Dry up for so many reasons out of no fault of our own making but due to circumstances beyond our control. One might end up having to forfeit Life Insurance protection that we really need. We don’t want that to happen to anyone. Enough for today.

Stay well and be blessed. God Bless you all.

Kunda Kalaba

Published by Kemman

Regulatory and Independent Consulting Professional with expertise in Financial Crime Risk Compliance encompassing Anti-Money Laundering (AML), Countering Terrorism Financing (CTF), Anti-Bribery & Corruption (ABC – FCPA & UKAB), Global Trade & Sanctions, Bank Secrecy Act (BSA), Know Your Customer (KYC) and Customer Due Diligence (CDD), Internal Audit Testing, Reviews, Validation, Risk Assessment. Worked in Asia, Africa, Europe, the Middle East, North America (USA). Banking & FinTech, Anti-Sex & Human Trafficking Advocate, FOREX & Cryptocurrency trading, Travel & Tours, Telecommunications & Energy.

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