By Christopher Mwamulenga 

From the perspective of many Tanzanians life insurance is not a necessity with exception to elites and small communities that have good exposure to advantages of financial services. According to the Tanzania Insurance Regulatory Authority (TIRA) life insurance has grown by 5.6% and 8.6% in the year 2017 and 2018 respectively. Although the growth rate is good but there are few reasons that still hinder the progress of life insurance in Tanzania. TIRA identifies them as follows:

• Majority see insurance as an unnecessary commodity due to lack of knowledge and low income capacity.

• International standards and terms that do not fit our local environment.

• Distribution expenses of  insurance products that raise insurance expenses to both insures and consumers.

To overcome this, an intellectual, moral and social guidance should be accessible to all levels of community. Evidence from our vast experience in the financial services industry suggests the need to change people’s perception on life insurance  for the betterment of current and future generation.

For instance, when considering other insurance products such as non-life insurance there is a better understanding of them compared to life insurance products. A contributing factor among others is that most non-life insurance such as motor and health insurance are forced by law and receive significant  enforcement by the government.

Life insurance is essential for achieving  stable life, high living standards and improved social welfare in the community. To achieve this, life insurance companies have a huge role to play especially in filling the knowledge gap that exists regarding life insurance.  

Overcoming this situation, insurance companies are currently taking various measures such as raising public awareness through face to face persuasion, radio, television programs, digital/electronic technologies, news papers’ blogs and others. These measures are taken to change the public perception on life insurance services. For instance, BUMACO Life Insurance raises the public awareness on life insurance through a weekly program at Kicheko Radio Station and on its social media pages on instagram and twitter. 

Life insurance is about life planning and it's for everyone in the community regardless of their financial status. Life insurance has different products depending on the risk that they want to insure. It gives the consumer the choice of selecting  the amount of benefits, time of insurance cover, amounts of premiums, means and modes of payment. In addition, life insurance provides a mechanism for target saving. Life insurance as an instrument for progress can help an individual or family to plan for education, retirement, and generational wealth transfer. Furthermore, Life planning is essential for provision and caring for dependants and loved one especially in instances of unexpected death.

The author of this blog entry has 15 years of   experience as a financial services practitioner in Tanzania.

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By Gilda Swai

Financial planning means a relationship between the person's current situation and their goals together with strategies used to achieve such goals. Financial planning needs people to make decisions and changes in their life in proper ways through which they can achieve their goals. Generally, financial planning is all about problem solving and setting financial plans. In setting financial plans, there are various questions one needs to ask, such as:

1. How much should I save for my child's education? How much will my child education cost?
2. How much will my family need in case I die today?
3. How much money do I need when I retire?

There are many challenges and a lot of questions that someone may ask when it comes to financial planning. But the best solution for these challenges and questions is a Life Insurance Plan.

Life insurance is a long-term contract, which pays benefits to the person who takes it. The benefit is paid on the specific event mentioned in the contract such as illness, disability, death, and/or retirement. The benefit is paid to the person who takes the life insurance policy and in case of death the benefit is paid to the beneficiary. Life insurance policy can take 5, 10, 15 and so on years. There are life contracts for the whole life of the person who takes the policy.

Bumaco Life Insurance policies have saving and protection elements. But there are life insurance policies that have only protection elements like whole life policy. This is because the benefit is paid upon death only. Endowment policies, such as those provided by Bumaco Life Insurance, have both saving and protection elements because the benefit is paid upon the expiry of policy period or death.

Thus, in order to answer the above financial planning questions, one can use a Life Insurance plan. For example, in Bumaco Life Insurance, one of the products of life insurance is Education Annuity whereby a parent or guardian may take this policy for the future education of their child(dren). In this policy, a parent may estimate the cost of their child(dren) education (it can be primary, secondary ,college or University level), after estimation a parent can start to gradually save for their child education through a life insurance policy.  The policy will pay benefits upon the maturity (expiration) of the policy, which can be after 5, 10 or 10 years or upon death of the person (i.e. the parent or guardian) at any time during and before the policy expires.

In the case of the second question, somebody can take a whole life policy. In this policy someone contributes a certain amount of money (premium) depending on the amount of benefit that the person needs. The person will be contributing such an amount (the premium) in his or her lifetime and the benefits will be paid to his or her beneficiary upon death.

About the last question, one can take an Endowment Life Insurance policy, which pays benefits upon expiry of the policy or death. Thus, one can take an endowment plan for the period of 10 years, for example, if he/she will be retiring in 10 years. Hence, the person will start enjoying the policy benefit after he retires in 10 years.

Life Insurance plans are customized to the person’s financial needs and goals. Thus, for all your financial planning, we advise you to secure a life Insurance expert to assist and advice.

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By Evarist Shirima

Achieving financial independence is unrealized goal for many individuals.  Financial independence is an accomplishment of a specific level of financial worth that can free an individual from fear of poverty and failure. Hence, it helps to build a stronghold of safety. This is a subjective state that is ideal for responsible adult life.  Being financial independent requires attention. It gravitates toward people who respect and value their finances and are capable of doing worthwhile things with their financial resources. Financial resource depletes from people who do not understand or take proper care of their finances.

Irresponsible management of finances can lead to retirement poverty. Its pity when people retire poor at the end of their working lives. Parkinson’s Law can help us understand why people end up poor during their retirement. The Law says that as people make more money, their spending habits also increase. Thus, the tendency of increasing spending when income increases deprives people from saving and investing for their retirement life consequently trapping many people into retirement poverty and dependence on their families and state. In addition, the tendency of increasing spending when income increases leads individual to consume what they do not need and can sometimes lead to debt traps and financial frustration.

Accordingly, to escape poverty and financial frustration one must violate Parkinson’s Law by being conscious, deliberate and regular in spending less than earning. It can be achieved by maintaining a lower rate of growth in expenses compared to earnings. This will provide enough funds to save and invest for future. Investing on the difference, will create the potential of independence as the interests on savings and returns on investment will compound over time. The savings can provide a buffer and peace in times of trouble and uncertainty.

To understand this, consider the following example. Juma is 30 years old and he earns $1000 dollars, if he spends what he earns by the time he is retiring at 60 years old he will have no any retirement saving. However, if Juma spend 90% of his earning and save the rest 10%, that is $100 dollars with an interest of 5%. Juma will contribute $36000 but will have $84,000 on his retirement fund. This suggests that Juma can spend $700 every month for 10 years without working, or he can spend £350 every month for 20 years after retiring. This means that if Juma decided to decrease his spending to 80% he will save $200. That means Juma will contribute $72,000 but will have $168000 on his retirement fund. Thus, Juma can spend $700 every month for 20 years during his retirement. This is a little bit less than what he spent during his working life. Therefore, prudent spending leads to financial independence and easing during lifetime. It ensures continuity in ability of spending. It also helps in transfer of wealth to other generation as it reduces chances of dependence during retirement and if life cuts short too early one can still provide for their loved one. A way of achieving such stability in life is by getting life insurance and or interest saving accounts.

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