Bluewave Insurance News

2018-07-29 16:07:17

The best way to manage your finances no matter how meagre they are is by proper planning. Many people are guilty of planning almost every aspect of their life except money. Probably you have a weekly meal plan at home, you have a plan of the activities you need accomplish at work daily, weekly or even monthly, you plan what time to go to bed each night and what time to rise up each morning and be at work on time. You plan your meetings, travels and even the weekend fun weekend activities, but you do not have a plan for your money.

Planning your money helps you see how much you have coming in as income and how much you need to spend allowung to to save, and invest your money. In our last article, we highlighted different tools that can be used to help you plan your money. But where does insurance fall in this scheme of things? Is it an investment opportunity or a liability in terms of money to spend.


Investopedia sites an investment as "an asset or item acquired with the goal of generating income or appreciation. In economics an investment is the purchase of goods that are not consumed immediately but are used in the future to create wealth."

In your own financial planning it is important for you to determine the things that are investment assets for you. For example ceratin purchases like a pricey top of the range laptop might be seen as a liability, however if your core business is programming or graphic design the ability to process your work faster means you can charge more, or do more work increasing your income and in this case that laptop is an investment.

Using this criteria how is insurance an investment?


Beyond the very basic function of insurance which is to cushion people, and businesses from unforseen risk, insurance can be used as a very smart investment tool.

In Kenya as with every where in the world, one is expected to make payments to the governments as tax. This is an important part of you responsibilities as a citizen. However there is always the need to recoup some of that money back by reducing your tax bill.

Life Insurance plans which are used as a savings plan or as an Estate planning tool are the first and easiest way for you to save money on your monthly and annual PAYE tax bill. Life insurance is taken out to offer financial protection to ones decendants in the event of death, permanent of total disability or critical illness.

From these life insurance plans, monthly contributions are allowed a tax relief of up to Ksh. 5,000 per month which totals up to Ksh. 60,000 per year. In addition, all future pay-outs on the policy and any other bonuses accrued are not liable to Capital Gains Tax (CGT) or any other class of tax.

According to My Wage Kenya Premiums paid for education policies, health or life insurance can be deducted from tax payable, provided that you have proof of the policy, and that premiums have a maturity period of at least 10 years. There is a caveat, if the cover is surrendered before the cover matures you have to refund all relief granted to KRA.

In this way, your Insurance premiums go towards saving and earning interest on your premiums to be used at a later time, and they also allow you to recoup some of your earnings from the tax man.


Photo by rawpixel on Unsplash

To get the most out of your insurance as an investment follow the same rules that you would to vet your potential investment opportunities.

  1. Review Your Needs and Goals - Don't just get an insurance cover to get the refunds from the tax man. Do you need the insurance, what makes sense to you? Where do you see yourself in 5 years, 10 years? How will your investment in an insurance product help you get there. Being clear about this will allow you to choose the right products to suit your needs and goals.
  2. Consider How Long You Can Invest - Think about how soon you want to get your money back, and how much you can pay on your premiums. Make sure that as you determine the best insurance product for yourself you do not put yourself under undue financial straits trying to make payments. Also determine how you would continue to make payments if you lost your current job, or had a reduction or had a reduction in earnings.
  3. Review Your Insurance Periodically - When planning for the longterm remember that the product that you bought, or acquired at 30 may not work for you at 42 years with a larger family to provide and think about. You can always review your policies with your insurance agent and ensure that the plan you have is serving your needs well.

Remember to also go over the basics covered in our article about finding the right insurance agent and you will be well on your way to making smart investment choices when it comes to insurance.

Have a profitable, #Insured week ahead.