The intent of collecting life insurance policies in Ghana is to financially protect our loved ones when they are no more.
It’s more reasonable to take time and make your research before diving into this potential long-term financial decision.
So you will meet the right company with the proper coverage and best premium.
So, in this beginner’s guide to life insurance in Ghana, you will get all the things you need to know about life insurance just in one place.
What is a Life Insurance Policy in Ghana?
A life insurance policy is a contract between the policyholder (the person that purchases the policy of an insurance company) and the insurer to show that some financial benefits will be given to the beneficiaries of the policyholder when he dies.
These death benefits are paid when the policyholder is faithful in the payment of his premium, that is, he didn’t cancel his premium before dying.
These beneficiaries can choose to do anything with this lump sum paid by the insurer.
This includes paying bills, paying off your debt if you left any for those depending on you, and sponsoring your children in college or high school.
Most importantly, the death benefit is non-taxable, that is, you don’t have to file tax claims for them.
Also, before life insurance in Ghana is carried out, the company through some actuaries will investigate the fitness of your health and other of your activities.
They would want to know how healthy you are and how vulnerable you’re to sickness.
Types of Life Insurance in Ghana
There are primarily 2 types of life insurance policies in Ghana, term life insurance and permanent life insurance.
Term or temporary life insurance
This is a life insurance policy that guarantees death benefits to be paid to the beneficiaries should the policyholder die within the specified agreed time.
Once the term life insurance in Ghana lapses, the policyholder can choose to renew it, cancel it, or upgrade to permanent life cover.
Term life insurance is determined by the health condition, age, and gender of the policyholder and sometimes, they might demand a medical exam.
Some life insurance companies in Ghana will even go further to ask for your smoking status, occupation, and driving status.
When renewing your term life policy, your premium will be calculated according to your current health situation and age.
For instance, if you got your first term life insurance when you were 30 years, and want to renew it after 10 years.
That’s, you are now 40 years, you will pay a higher premium due to the increase in your age. Also, if you were diagnosed with serious sickness during your renewal, it will also increase the premium.
Term life insurance only provides death benefits. So you won’t be getting any added benefits the whole life gives or universal cover gets.
That’s a minus for term life insurance.
However, term life insurance has the least premium and you can purchase a premium that can last 5,10,20,25 years.
Also, some life insurance companies in Ghana like Old Mutual pay the beneficiaries when the insured is temporarily or permanently disabled.
Permanent Life Insurance
As you guessed, this policy will not expire, or else the insured decides to terminate or stop paying the premium.
Applying for the permanent life insurance policy in Ghana comes with added benefits when compared to term life insurance.
However, the cost of getting permanent life insurance is higher than term life.
Permanent life insurance is divided into two types; whole life and universal life insurance.
- Whole Life
According to Insurance Information Institute, whole life insurance is the most purchased permanent life insurance.
And with your whole life insurance, your premiums are fixed, nothing will make them go up even when the market is bad, except if you chose to cancel the premium.
Just like term insurance, you are guaranteed a death benefit, if and only if you don’t cancel your premium.
Also, when you purchase a whole life policy, you’re building cash value.
Cash value is a portion of the permanent life policy that includes an investment component.
With cash value, you can choose to collect a loan when there is an emergency or withdraw from the investment made. You can only do this when the funds have increased.
Additionally, if the policyholder was unable to pay the loan collected through cash value, his death benefit will reduce by the remaining amount that wasn’t paid.
- Universal Life
This is almost similar to whole life, but with universal life insurance in Ghana, their cash value earns interest.
Unlike whole life or term life insurance, with universal life, you can adjust your premium and death benefits.
The insured can choose to cancel a premium that is higher than the cost of insurance. Then this extra premium is moved to the policyholder’s cash value and it expands interest.
Also, you can withdraw or collect loans from your cash value, but the money withdrawn is taxable. While the money borrowed is not taxable.
5 Huge Benefits of Life Insurance In Ghana
Life insurance is of great importance, but many Ghanaians choose to live without it. In fact, Ghana has a low penetration rate of 1.10% in life insurance policies according to AsokoInsight.
The complaint made for this low penetration is because of the premium price. But when looked deeper, the premium is not as high as they assume.
Moreover, they forget to see the benefits a life insurance policy can bring to them.
Here are some of those benefits;
Outside the fact that the insurance company will pay death benefits to the policyholder’s beneficiaries, these payments are non-taxable.
Your beneficiaries will have financial stability
It is always recommended that you take a policy that is 7—10 times your annual income.
Imagine if your premium is 10 times your annual income. That means, your beneficiaries won’t worry about finances when you die.
This huge coverage can take care of expenses like your child’s college fees, mortgages, and other debts.
When you purchase a permanent life insurance policy in Ghana, you are liable to the cash value.
As this cash value accumulates, you can either collect a loan through it or withdraw it.
You can use these funds and pay mortgage, debts, or even buy a car.
Another benefit of a life insurance policy is the payment of the policyholder’s funeral.
Planning funerals in Ghana require lots of money, and it will be painful for your family to pay for your burial expenses from their pocket.
But with life insurance, your family can plan your burial with the hope that the financial aspect of it is taken care of by the insurance company.
Cover for temporary or permanent disability
Some insurance companies offer benefits when you’re temporarily or permanently disabled. Which can cause you not to work again.
6 Precious Factors Affecting the Cost of Life Insurance in Ghana
A life insurance policy is very important. Even the least premium can be of great help to those depending on you.
Here are some of those factors that insurance companies consider when giving you their premium.
Age is the biggest factor that determines the amount you have to pay. Because the younger you are the less likely you’ll die.
So these insurance companies assume that when you are young they won’t have to worry about paying any benefit to your beneficiaries anytime soon.
Also, there is a lower premium if you’re young. That’s the younger you are the lesser the premium you’ll get.
Your health state is another factor that determines the price of life insurance in Ghana.
If you’re in a good state before purchasing a life cover, you’ll get a lower premium too.
For some companies to know the policyholder’s health status, they will do a medical exam. Where they will examine your weight, height, blood pressure, heart condition, and other important measures.
It is a lot better if you treat yourself for any critical illness before signing for life cover. With that, it can put you in a better position of getting a less expensive premium.
That said, it is not a prerequisite to treat your critical illness if you don’t have the finances. You can still go ahead and get life coverage.
This is another big factor that determines your life insurance in Ghana premium.
According to World Health Organisation (WHO) women live 6 to 8 years longer than men. So, the female gender has a higher tendency of getting a lower cost of a life insurance policy.
The Type of Life Insurance Policy
If you’re choosing a term life policy, you will have a less expensive premium to worry about. The reverse is the case with a permanent life insurance policy.
Riders are added features the policyholder chooses to include in their coverage.
Riders come with additional benefits. For instance, if you choose to add a temporary disablement rider to your policy, it will cover you when you’re unable to return to work for months.
The insurer will pay for your bills which include medical bills. This enables you to enjoy some death benefits while you’re still alive.
Life Insurance companies in Ghana also examine if the policyholder smokes. Because of its health implications of it.
There are possibilities if you’re guilty of smoking, your premium will be more expensive even if your health status is fine.
9 Crucial Questions to Ask Before Getting Life Coverage
Do I really need life insurance in Ghana?
Sometimes we feel we don’t need life insurance, especially when we are young. The truth still remains, we need it, even if we feel we don’t.
If you have married and have at least a kid, you definitely need a life insurance policy. You need to protect their financial well-being.
Most importantly, the pandemic has taught us some lessons about life insurance.
What is the life insurance policy I need to purchase in Ghana?
Deciding on the right life insurance premium to get is very important. You need to know your financial status before choosing the right cover to get.
If you’re young and just came out of university with little financial support, you don’t need to hurriedly acquire whole life insurance. Term life policy is a lot cheaper, it could be a good start.
Are there situations that can hinder benefits not to be paid?
Some things can deny benefits not to be paid to those depending on you. Which one of them includes death during the contestability period.
We will explain the contestability period and other things that can hinder the payment of benefits in life insurance in Ghana in the next section.
What happens if I don’t pay on time or miss a month’s payment?
You need to confirm from the insurance company how your delay on the premium will affect your benefits. Some of the companies will cancel your premium after 30-60 days of not paying your premium.
If I move out of Ghana, what happens to my policy?
This is another consideration you should have on the checklist. You need to confirm what the insurer will do if you move temporarily or permanently out of Ghana.
What do I know about the insurance company?
Before buying a premium, you need to examine insurance companies and know the right one for you.
Moreover, you can even get a broker in Ghana to help you get the best insurance company that meets your needs.
How do I change the beneficiaries?
For some reason, you might want to change the beneficiaries of your death benefits. Maybe you had children, or your niece is now permanently under your care or even one of the beneficiaries died.
You need to speak to the insurance agent to know how to resolve this.
Does inflation affect my life insurance in Ghana?
The value of money is reducing on yearly basis, so inflation is something we’ve come to accept.
However, the question remains, will it affect my benefits?
If you intend to get term life insurance, inflation will possibly affect your death benefits. Yet, you can ask the insurance company if there are riders to factor out inflation.
However, for permanent life insurance, inflation doesn’t affect it. It has a fixed death benefit.
How long will it take for death benefits to be paid?
This is a very important question to ask any insurance company in Ghana.
Because, according to research in ResearchGate, some life insurance companies in Ghana find it difficult to settle claim payments and subject customers to long processing periods while some settlements end up in court.
3 Accurate Reasons life insurance in Ghana won’t pay
When your beneficiaries file for claims there are reasons they won’t receive your death benefit. And you must see these reasons and know how to avoid them.
The insurer doesn’t just hurriedly pay a claim when there is a request. They have to do some examinations before paying claims.
Here are 3 reasons life insurance companies in Ghana won’t pay claims.
Policyholder Died During Contestability Period
A contestability Period is a clause in a life insurance cover that authorizes the insurer to cancel the policy of the policyholder if he dies within 2 years of purchasing the cover.
This also authorizes them to withhold part or full death benefits.
Also, some companies have a clause that permits them to completely deny death benefits if they find out the policyholder committed suicide.
Submitting false information
If the insurer finds out you lied to them, they can decide to deny your beneficiaries their benefits.
If you lied about your medical condition and during your death investigation, they found out you had a hidden critical illness, they can choose to withhold your death benefits.
But, if it was just a little omission, probably because you forgot, or thought it wasn’t important, it might not lead to denial.
Most importantly this happens during the contestability period. When you have passed it, false information might not speak against you.
When you’re unable to renew your policy may be due to poor finance, which can lead to the cancellation of the life insurance policy.
But before it will be canceled, the insurance company will give you 30 days of grace to pay.
Also, when you forget to pay your monthly premium even after the 30 days grace, your policy might be canceled.
So one of the best ways to avoid this is to allow your insurer to withdraw your premium directly from your bank account.
Ghana’s Life Insurance Market
Ghana’s insurance market is really slow.
For instance, according to AsokoInsight since 2015, only 4 insurance companies have entered the Ghana market; two from life insurance and the other two from the non-life segment
And this has only contributed less than 2% of Ghana’s GDP.
However, the introduction of mobile insurance has increased the chances of consumers purchasing premiums, especially in the life insurance industry.
AsokoInsight also reported that Ghana’s non-life segment has 5 companies higher than the life insurance segment. That is, out of 53 insurance companies in Ghana, 29 are non-life segments and the other 24 are life insurance segments.
“There are also 3 reinsurers companies in Ghana, 90 broking companies, 4 reinsurance brokers, and 7000 insurance agents as of March 2019,” said AsokoInsight
According to Oxford Business Group, the big life insurance in Ghana has seen amazing profit after tax. They said;
“Ghana’s largest life insurers, whose underwriting standards tend to be the highest, have shown their ability to secure profit. The largest provider by assets, Enterprise Life, posted a profit after tax of GHS73m ($14.1m) in 2018, while two other major players, StarLife Assurance and SIC Life Insurance, reported figures of GHS24m ($4.6m) and GHS23m ($4.5m), respectively.”
While some other life insurance companies in Ghana complain of loss after tax, 9 companies to be precise. But these big guys have reported consistent profit.
What makes the difference in their underwriting, these big guys take time to give sound underwriting, and that’s where they make their money.
Life insurance in Ghana Conclusion
Thanks to “the beginner’s guide to life insurance in Ghana”, you don’t need to spend a lot of time searching for life insurance information. Everything you need to get started is in this guide.
As you saw in the guide, having a life insurance policy cannot be overemphasized. Leaving the financial stability of your family unprotected is a huge risk.
However, while shopping for quotes, make sure you ask yourself some of the questions we listed in this guide.
Before you leave this guide, make sure to give a quick comment to let me know what you think about “life insurance in Ghana.”