Individual Life Insurance - Types and Benefits

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You take good care of your loved ones when you are there with them but have you thought of the time when you may not be around? How will your family fend of self in your absence? Life Insurance is a security that helps a family sail through difficult times in absence of the breadwinner. 

So, what exactly Individual Life Insurance is? 

Individual Life Insurance is a plan to provide insurance coverage for a single person. It provides a lump-sum amount to the family if the insured person passes away within the policy term. 

Individual life insurance also helps cover the family members’ financial needs like paying their personal loan, car loan, mortgage, etc. It also provides permanent benefits like estate planning and tax-deferred savings. 

Types of Individual Life Insurance

Here are a few basic types of individual life insurance plans.

Individual Term Life Insurance

Individual Term Life Insurance provides the coverage for a specific duration starting from five and going up to thirty years. The term insurance allows you to choose the term and period depending upon your needs. The term life insurance also pays your nominees in case of an unfortunate death during the term duration.

Here are the benefits of taking term life insurance for individuals.

  • Individual term life insurance is cost-effective and provides you financial support for your loved ones to deal with their financial needs like education, mortgage, etc. 
  • You can choose the time frame based on their preferences. 
  • When compared to other individual life insurance policies, term life insurance plans offer lower premiums. 

Permanent Life Insurance

Permanent Life insurance covers the policyholder for the whole life as long as they pay their premiums. People mostly buy these types of insurance plans to save tax. They also opt for these life insurance policies to fund the trusts that support special needs dependants. 

Here are the types of permanent life insurance.

Universal Life Insurance: Universal life insurance provides permanent life insurance cover for individuals. It allows policyholders to adjust premiums, interest rates, and payment schedules as per their convenience. The best part about this type of life insurance is that it enables policyholders to withdraw cash, take a loan, or adjust their premium payment once the policy accumulates sufficient cash value. However, making these kinds of withdrawals can affect your insurance coverage or premium later on.
Here are the benefits that universal life insurance for individuals offers.

  • You can choose your preferred insurance cover, either the one that focuses on affordable guaranteed protection or the one that offers protection plus cash accumulation
  • You can vary the amount of premium based on your convenience
  • Flexibility to use the accumulated cash for loans and withdrawals
  • The policy passes death benefits to your heirs free of the federal income tax.

Whole Life Insurance: This type of life insurance covers you from the day you have bought the insurance cover to the day you die. The whole life insurance for individuals accumulates cash value on a tax-deferred basis to help them increase the value of death benefits. The whole life insurance policy also gives you the advantage of accessing any available cash value during the policyholder’s life.
Here are the benefits of buying whole life insurance for individuals.

  • The whole life insurance policy never expires
  • You can increase the value of your policy if you pay dividends
  • Your beneficiaries get the payment if you die
  • It can be a powerful tool in estate planning as it helps in reducing estate taxes and funds trusts
  • The premium doesn’t change throughout the policy term
  • It allows you to take a loan against the value of the policy.
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Survivorship Life Insurance: Survivorship life insurance for individuals covers two people in a single policy. It pays nothing at the time of death of the first member. However, it pays the benefit upon the death of the other member. Therefore, the premium is comparatively lower than two different policies for both members. The parents who plan on funding a legacy for their children buy this life insurance plan, as it allows them to maximize the life insurance benefit.
Here are the benefits of buying a Survivorship Life Insurance for individuals.

  • It provides the guaranteed benefit with a fewer premium
  • The insurance policy is cheaper than buying two separate policies for two individuals
  • A simple way to pass on health to your children, institute, or preferred charities

Insurance companies in the UAE offer the best life insurance plans for individuals. You can perform research and check the benefits they provide to find the best life insurance plan for you. Ensure you check all the factors like the claim and renewal process, the claim settlement ratio, etc., before you make a purchase. Going through the current financial condition of the insurance company will also help you make an informed decision.

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