Monday 1 July 2013

Insurance Planning


Insurance is a very important tool for managing personal finances. It helps in handling risks that faces property.
An individual insures against personal risk. This is done in order to be safe and eliminate the ability to earn income as a result of old age, death, unemployment and disability.  
Property Risk: This is associated with destruction of property, theft or damage of material wealth. An individual can insure against direct and indirect loss. It is advisable to insure business assets stored at home separately.
Liability risk: This is associated with punitive damages that may be caused by negligence or carelessness hence leading to damage of property or cause personal injury.
Life Insurance
There are two types of life insurance. The first one is term insurance and permanent insurance. Term insurance just covers the life of an insured person for a pre-determined period of time. This can be 10 years or more. On the other hand, permanent insurance is covers the life of the insured until death.
Disability Insurance
Most people can agree with that a large number of people in the developing world are actually under-insured. That means those people are actually exposed to a lot of risks in life. Therefore, there is a likelihood of being disabled at some point in life.
Health Insurance
This type of insurance is used to pay for medical care at home or in an institutional setting. In Kenya there are several families taking care of people with permanent physical or mental illness. That means that there are several people who are not only disable but also frail.
Property Insurance
There are two common types of insurance. That is motor and home insurance.
Motor Vehicle Insurance
All motor car owners are required by the law to be in purchase liability insurance for their motor vehicles. This insurance protects the general public from injuries or damages when the vehicles are involved in an accident.
The minimum amount of insurance changes from one country to another.
Home Insurance
This is an insurance policy that covers your home form damage from fire. There are some plans that cover all types of risks while the rest are very specific hence covering fire, vandalism and theft separately.


Tax Planning

This plays a central role in personal financial planning. Taxation planning aims at helping an individual pay the lowest amount of tax possible as allowed under the law.
The following is the taxation of different types of incomes.
There are a large number of income sources for people. Some generate their income from a single source while other people generate their income from numerous sources. It is very possible for an investor to reduce the amount of money to be paid as tax by simply converting one type of income into another which is considered to have tax advantages.
If you are employed and receive income as a result, such income is fully taxed at applicable personal, rates.
The income received from investments is taxed at rates which are dependent on the type of income earned. If the income is earned as interest, then it is fully taxed. Finally, it is only 50 per cent of capital gains which are taxed.
What is tax referral?
In case income can be spread over a period of time, then, it is possible to defer tax as well.
Income Splitting
This is a technique used to reduce the amount of taxes paid by transferring income from a higher tax bracket family member to a lower tax bracket one. In many countries, the law tries to prevent income splitting as much as possible.
In a case where your spouse has no income, then, it is useless to start paying such spouse with some income. The point is that you will still pay tax for that income split and paid to the spouse.
Income generated by property that has been transferred to a spouse is traced back to the source of the gift. In case the spouse re-invests the income, now that income will be taxed under the name of the spouse.
Charitable Donations

When gifts are made to charitable organizations, there are many associated benefits. Note that this depends on the type of gift that is transferred. The nature of the charitable organization and the timing of the gifts are also carefully considered. The action of providing gifts brings great tax benefits to your estate taxes.