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1. Insurance:
a. Life/ Health Insurance
b. Non-Life Insurance
2. Private Insurance Funds
1. Insurance (Peace of Mind and Investment)
- It is extremely unfair to compare the performance of insurance against other investments without considering the core features of insurance.
- Insurance is necessary to protect your family from the uncertainty of your life.
- When you buy an insurance policy for your car, and if fortunately no damages occur, do you get anything? But this means that you spent the amount (premium paid) to secure a valuable property.
- People often talk about return on investments and tend to compare their values with those available on various insurance policies.
- We often compare the results after, say 10 or 15 years from an investment instrument, for instance savings certificate, and then try to convince ourselves that investment is providing a better return than an insurance policy.
- Therefore, we should think very realistically about our life, for instance, if you invest L.E. 1000 in savings, which earn 10% per annum, at the end of the year your money will grow to L.E.1100, but what if your death occurs in the first year itself!! The L.E.1000 can give an insurance cover up to an approximate sum assured of L.E. 250,000 (depending upon the policy type, age, etc.), and this sum assured shall become available to your Beneficiaries. Well, how do you compare the return in such a situation? Is it 100 % or 1000 % or more?
a) Life / Health Insurance:
| >Why must you insure your Life?
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- When planning your life you must consider your family's needs such as medical expenses, house rent, higher education and marriages expenses.
- Throughout our life span, we are faced by different risks like failing health, financial difficulties, accidents; insurance will help you to hedge these risks, by transferring the risk you may be exposed to, to the insurance company.
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Why Insurance Policies important?
- Once the funding takes place, the investor will be life covered against death and disability, and the Insurance Company will cover the complete balance of his loan (in case of death or 50% disable).
- The property will also be insured against fire.
| >What do Life / Health Insurance have to offer?
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- Life Insurance is basically an asset that is bought under a contract, accompanied by contractual guarantees that ensure large sums of money at the death of the insured person.
- In the event of the insured person's death, his beneficiaries will be reimbursed to the full sum assured that he was insured for.
- In the event that the insured person has an accident or suffers from an illness, he will be compensated with the sum assured since he may not be able to have his normal life back.
- In case, the accident is not that severe, he should be able to recover after medical treatment, and if he has bought a medical policy, then the insurance policy will pay his medical expenses, treatment and medication.
- At the point of retirement, Life insurance can be used to secure the family's supplemental income needs.
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| > Are there any other benefits of buying insurance than the risk cover?
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Yes, there are several benefits of buying insurance other than the risk cover:
- You can use the paid premiums to reduce your Tax Liability.
- Life insurance policies can help you in securing your loans.
- When interest rates fall and invested money loses value and stops gaining dividends, the value of your insurance policy once set, never reduces.
- Life insurance policyholders can withdraw their policies and get the cash value in case of a financial emergency.
- Individuals can avail of loans based on their insurance policies.
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| >When should you buy life insurance?
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- When you have a family and young children and you’re the only income provider (Breadwinner) for your family, then insurance on your life is vital.
- And if the non-income spouse should die, then the expenses of raising your children will be increased; that argues for buying insurance for both lives.
- Now you are young and in good health and have enough income, what are going to do when you retire? Do you still have the same income level? Life insurance (annuity plan) can help you.
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| > How much Life insurance you need?
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Step 1: Determine your expenses
Figure out a rough estimate of your annual family budget. This could include your basic living expenses, child care, mortgage, future education expenses.
Step 2: Estimate your assets
Estimate a figure for your assets such as savings, or any other income (annual salary).
Step 3: How much you can afford
From previous steps estimate how much you can afford to buy an insurance policy.
Step 4: Determine your insurance needs
Determine what type of life insurance you need. Do you need death cover only? Or do you need to consider saving? For how long you want this insurance?
Step 5: Match you needs
Choose the right policy by matching what type of insurance you need and how much you can afford.
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| >How to file a Life insurance claim?
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After a loved one dies, you need to file his life insurance claim which may be difficult. You may ask: who should I contact if I'm not able to find the insurance policy?
- See if you can find the actual insurance policy (or a copy), if you can, then go to step 2. If you are not able to find the actual policy (or a copy), try to find the company that your loved one may have used. If you still cannot find any policy information, don't stop there. You may find any information about to whom he has paid his policy's premium and if it was easy to reach the company who this person belongs to, it is great, or if not you still may call the Egyptian Insurance Supervisory Authority on the policy.
- Call the company on the policy.
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b) Non-Life Insurance:
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>Why must you insure your Business?
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- Huge losses may be brought to your business by means of fire, theft, explosion, machinery failure, shock or any other, natural disasters...etc. And as a result many lives, buildings, and established businesses may collapse.
- A successful businessman, who is realizing every risk which his business may be exposed to, should insure his business adequately to minimize his losses.
- Any business is set up over a period of time and spends large sums of money; incurring such huge losses just overnight could have drastic effects.
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| >What does Non- Life Insurance have to offer?
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Property Insurance
- Everyone possesses tangible assets that can be in the form of Buildings, Vehicles, Share Holdings...etc.
- These properties are exposed to many different risks ranging from fire to theft and robbery, which means an individual's lifetime of hard work, can be wiped out in a second.
Interest Insurance
- Everyone has to do specific duties, and is expected to maintain a standard of attitude. But then, everyone is expected to err and may suffer a loss.
Liability Insurance
- Everyone has to control his actions and behavior so as not to cause injury or damages to other people and their property.
- Everyone is responsible for his behavior and actions.
- By investing in Liability Insurance, you can secure against any liability you might be responsible for due to your behavior and actions.
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2. Private Insurance Funds:
- Private Insurance Funds depend completely upon the co-operation between a group of individuals who establish a fund together.
- It is a Scheme which could be established at any company, association, authority or between any group of individuals related to the same profession, occupation or have a social relation.
- It can be established without a paid capital (depending upon the accrued benefits) and mostly can be financed by the contributions of the members (employees) and/or the employers.
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| >What Is The Purpose of Private Insurance Funds?
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Private Insurance Funds are created (on a voluntary basis) in order to give employees (or members) the security and stability of a guaranteed income stream during their retirement. In fact, a retirement benefit which results from any given fund is composed of both employer and/or employee contributions.
The members are entitled to different type of benefits whenever the following events occur:
- The member's marriage or one of his children's marriages.
- The death of the member or one of his parents or one of his children or his spouse.
- Total or Partial Permanent Disability as a result of sickness or accident.
- Reaching certain age (retirement age).
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| >Why should you establish a Private Insurance Fund?
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As successful businessman, it is not just the salary that matters for your employees' loyalty; it is the other company programs and benefits, such as health care coverage and retirement plans that can more closely link an employee to your company. Therefore, a Private Retirement Plan (Pension Fund) is an important tool that can be used to strengthen your business and reward the people who have helped make it a success. Furthermore, a Private Retirement Plan (Pension Fund) creates a win-win situation for you, your employees and your business by offering:
Benefits to the Business
- Tax deduction: contributions to a private insurance fund are deductible as a business expense.
- Attract and retain highly skilled employees by providing a retirement plan.
- Employees appreciate the contribution toward their retirement security, especially when it's not reportable as income.
- Contributions paid by the company (Profit Sharing) increase employees' loyalty to the company.
Benefits to Employees
- Tax deduction: their contributions and benefits are deducted from their taxable pay.
- Provide an important source of retirement income for employees and their families.
- Provide health care, death, total/partial permanent disability covers.
- Provide social benefits of marriage and death of one the family members.
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| >What are the Types of Private Insurance Funds?
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Defined Benefits Schemes:
It is a retirement plan that defines the retirement benefits to be provided based on criteria such as years of plan membership, or years of service, career or final average salary and accrual benefit factor for each year, etc.
The retirement benefit can be calculated in advance (at the start).
Defined Contributions (Money Purchase Plans) Schemes:
It is a retirement plan that defines the amount of contributions (including both employees' and employer's contributions), to the retirement plan, determined on an individual account basis.
The benefit which the member will receive upon retirement is calculated at the date of retirement and is based on accumulated contributions and investment yield.
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| >How can you establish a Private Insurance Fund?
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The following information outlines some of the basic requirements for setting up a Private Insurance Fund:
1. The Scheme's Rules (for example):
- Section of definitions: name of the fund and the employer, service, employees…etc.
- Effective date
- Eligibility and membership
- Retirement dates – early, normal, deferred
- Employee and employer contribution percentages
- Benefit formula, if the fund's benefits are based on a set formula, i.e., defined benefit scheme.
- Termination benefits
- Funding of benefits/administration expenses/investment restrictions
- Termination of the fund
2. Information about the private fund and the responsible persons and their addresses.
3. Actuarial study.
4. Registration fees.
The Egyptian Insurance Supervisory Authority (EISA) will respond within 30 days form the date of applying.
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| >What is the role of EISA?
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The Egyptian Insurance Supervisory Authority (EISA) is responsible for ensuring that private insurance funds are administered according to The Private Insurance Funds Act No. 54 for year 1975. The Authority registers new funds, Investigates complaints, and monitors existing funds to ensure:
- Funds' provisions comply with legislation;
- Funds are administered according to the law; and
- Sufficient contributions are made per year.
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