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Why you should insure your business

One trader was unable to recover after varsity rioters looted her shop

In Summary

• Premiums may seem an unnecessary expense but it’s a worthy price to pay

Anti-riot policemen arrest a student of University of Nairobi after protests against the detention of an opposition legislator in Nairobi on September 28, 2017
Anti-riot policemen arrest a student of University of Nairobi after protests against the detention of an opposition legislator in Nairobi on September 28, 2017
Image: REUTERS

What’s the first thing that comes to mind when you hear the word ‘insurance?’ You probably think of those formally dressed sales agents who don’t accept your ‘No’ as an answer.

Most Kenyans take insurance only when the law forces them, as with the case of motor vehicle insurance. Most vehicle owners take the minimum insurance to avoid arrest; failing to cover their vehicles against fire, theft and breakdowns.

Whether you are a new business or an established operation, insurance can protect you from disaster. You may be running a successful supermarket, restaurant or hotel, but all it takes is a fire to turn your hard work into ashes. Without insurance, it’s impossible to recover from such a disaster unless you have an alternative source of money.

Rioting, too, has destroyed businesses. Priscilla Akinyi ran a stationery shop in Nairobi’s CBD close to the University of Nairobi. One day, rioting students raided the street where she was located and looted most of the businesses. “They took everything. The damage was so much that I could not continue doing business. I had to look for employment,” she says.

Medical bills from chronic health conditions, such as cancer and heart disease, have pushed many families into poverty. “Buying insurance cannot change your life but prevents your lifestyle from being changed,” said entrepreneur billionaire Jack Ma. “Medical bills can wipe off an entire family’s savings that they have built for decades.”

Insurance is so important that it is part of the ‘Six Laws of Wealth’ contained in the book, The Richest Man in Babylon. Written a hundred years ago, the Six Laws of Wealth are practical tips on how to save money and invest.

Apart from protecting a business from physical losses, there are insurance packages that protect employees at work (workman compensation).

There’s insurance for goods in transit and insurance for business disruption. There’s also legal insurance just in case the business is sued. If not adequately insured, any of these scenarios can cripple a business. Farmers, too, can benefit from crop and livestock insurance, especially in these times when unpredictable weather is causing huge losses.

The biggest reason why many Kenyans don’t take insurance is the cost of insurance premiums. A premium is the regular fee policyholders must pay to maintain the insurance policy. Payments can be daily, monthly, quarterly, half-yearly or annually. The Institute of Economic Affairs (IEA) attributes the low uptake of insurance in Kenya to the inability to pay insurance premiums due to low disposable incomes among the people.

Another important factor is a lack of understanding of insurance products. On this, the IEA blames insurance companies and their agents for being quick to sell insurance policies but slow to pay whenever policyholders submit their claims. This creates a perception among Kenyans that insurance companies are dishonest. For these reasons, most Kenyans rely on family, friends, religious institutions and saccos to bail them out during emergencies.

Before taking out insurance, it is advisable to consult a registered insurance agent. Shop around and find an insurance package you can afford. Insurance premiums may seem an unnecessary expense but it’s a worthy price to pay for financial security.