Any mention of paying monthly insurance premiums and you turn off many. Just like paying taxes, most people have a love-hate relationship when it comes to paying insurance premiums. 

The bitter truth is that, whereas you may hate paying premiums, there is a moment of pain and regret for everyone who does not have an insurance cover. Businessman Ivan is a perfect example of that experience. 

In 2012, the agricultural business dealer was rushing from one market to another in Kampala, the industrial capital of Uganda, when he got involved in a horrible accident that left him without the left leg.

“At that time, my wife was not working, and the entire family depended on me,” Ivan recollects. “For three months, I was in the hospital, and I used all the money I had, including the business capital, for treatment. I went from plenty to almost zero,” the father of four adds.

This week, Human Capital International is using the experiences of Ivan as a wakeup call to all entrepreneurs and employees, especially those with dependents, not to take life, the future of their families, and properties they hold dear for granted.

Insurance as a driver of wealth

Insurance is one of the essential conduits that one can adopt to create and protect wealth for self and family. 

Had Ivan subscribed to any medical or life insurance cover during his active business days, the medical bills during the unfortunate incident wouldn’t have exhausted all of his financial fortunes, including his business capital. 

Related article: Managing a family business: Key success factors to know.

His children, wife, and other dependents would not have experienced financial hardships, as is the case when sole breadwinners face challenges.

As a human capacity development company with the vision of helping Africans develop their businesses and build generational wealth, we fully recommend the adoption of insurance policies as one of the most effective ways to guarantee a sound and secure future.

In this article, we shall demonstrate how to leverage insurance to grow your wealth and protect it as well.

1. Medical Insurance for both the key person and family

Africa, unfortunately, is home to multitudes of very many poor populaces. According to a World Bank study on universal health coverage on the continent, over 11 million Africans fall into poverty every year due to high out-of-pocket payments. 

This adversity is largely attributed to treating diseases such as; malaria, tuberculosis, dysentery, and HIV/AIDs, thus, draining families of their earnings and subsequently impoverishing the continent.

Unlike the developed countries where the cost of prescription drugs is covered by the state or other regulated medical insurance schemes like the NHS in the UK or Medicare in the US, in sub-Sahara Africa, an individual is, to a very large extent, responsible for his or her health care. 

This means very little funds or none is left for serious investment or the starting of any business.

A study conducted by the World Health Organization concluded, for example, that “when medicines are not covered by insurance or public facilities, out of pocket payments can be significant and vulnerable populations are exposed to hardship and impoverishment.”  

Another study in early 2017 in Kenya by Medic East Africa showed that almost every four out of five Kenyans had no access to medical insurance. 

In Tanzania, despite their government adopting integrated health insurance schemes, the vast majority of the population remains uninsured. (World Health Organisation)

It gets worse for Uganda, according to the World Bank, about 40% of total Ugandan health care expenditures are out-of-pocket (OOP). (World Bank) 

Taking up a medical cover, therefore, is not a luxury, but a necessity since it reduces the future financial burden on you, your business, as well as your dependents when you fall sick.

Besides, a medical cover will avail you access to first-class medical services which you otherwise couldn’t afford out-of-pocket.

Health is wealth and, therefore, medical care is essential for every living being. “At a bare minimum, insurance cushions you against insurable risks. Risks that occur, but we have no control over,” says insurance guru, Emmanuel Mwaka.

2. Protect your wealth through insurance

American businessman Robert G. Allen once said: “money is one of the most important subjects of your entire life. Some of life’s greatest enjoyments and most of life’s greatest disappointments stem from your decisions about the money. Whether you experience great peace of mind or constant anxiety will depend on getting your finances under control,”

The moment you start to earn any money, either as an entrepreneur or employee, regardless of the amount, start to think about how you will grow and protect it. 

This article will interest you: Twelve money mistakes you must avoid if you are to succeed financially.

Many of the insurance products that are offered on the market are not just about protecting life and property in the event of the unexpected. 

They equally offer you an opportunity to audit your life and plan your long-term financial worthiness and that of your loved ones, projecting about 15, 30 years or more into the future. 

Thinking long term is the surest way of creating generational wealth. Insurance will help you achieve this by ‘forcing’ you to commit to financial obligations such as medical costs, child education plans, or real estate dream.

On a continent where accidents, job or business losses, and untimely deaths are common, you should be able to cushion yourself and your dependents while you are still well and able.

The World Bank estimated in 2010 that about 231,000 people perished in road accidents in sub-Saharan Africa, which accounted for almost one-fifth of the global road injury death toll. 

The combined burden of non-fatal road injuries in sub-Saharan Africa exceeded 14 million healthy life years lost,” reads part of the report.

Overall, Uganda spends at least Shs4.4 trillion ($1.2m) annually, about 5 percent of the country’s GDP on treating accidents, while Kenya, spends Ksh14 billion (excess of $50million) on the same, according to the United Nation (UN) study.

Therefore, taking medical insurance, at least for the key man of the business, or the family breadwinner, will not only secure you financially but also create generational wealth regardless of what happens. That means life insurance should be part of your immediate financial plans.

HCI hopes that, through the lessons in this article, the case of Africa where all dependants become destitute on the demise of a breadwinner will begin to see a swift reversal.

3. Insurance in entrepreneurship and family wealth protection

World over, entrepreneurs enter into business partnerships to either leverage on each other’s skillsets, financial clout, or growing markets. 

Regardless of the reason for the partnership, insurance plays an essential role in safeguarding your business partnerships, and by extension, your family’s wealth.

Consider this case study. Joan and Linda enter into a business partnership in their sanitizer business. They decide to enter into “a buy-sell agreement,”. 

This agreement is premised on the fact that in the event that one party dies and business liquidity challenges arise, a buy-sell agreement funded by a life insurance policy will raise funds to purchase the deceased partner’s shares. 

The sanitizer production business then insures both partners. In any eventuality, the life policy pays the benefit to the business; the business redeems the shares of the deceased partner and then pays out the beneficiary family members.

Here, insurance has solved two problems; helped the business to have liquidity and stay afloat in the most challenging stage of the business, and at the same time, the family of the deceased is still able to smile to the bank despite the death of the initial shareholder.

Equally important, entrepreneurs must embrace insurance coverage and insure all its core property and key people in the business whose demise or incapacitation, will affect business revenue, or shareholder confidence. 

Don’t be like Ivan, a man who toiled to create wealth but did little to protect it and thus lost all in the end. We believe the above suggestions will inspire you to use insurance to create and protect wealth.

Stand by for our next article which shall show you how to make the best insurance decisions for your life and business.