What Is a Unit of Life Insurance?

Even if a life insurance company has cheap prices, you might have to purchase dozens of "units"--the basic blocks of coverage used the industry--to fully protect your family. Instead of selling random amounts of coverage, such as $5,334 or $4,335, it is more convenient for a company to have a standard block of coverage, such as $2,000.


A unit of life insurance is the minimum amount of coverage you can purchase, and an increase in coverage will be a multiple of the basic unit, according to Baltimore Life Cos. If, for example, the life insurance company deals in units of $1,000, you could could purchase five units to receive $5,000 in total coverage.


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A life insurance company can choose the size of its units of coverage. Typically, life insurers deal in units of $1,000, according to Baltimore Life Cos. It is not unusual to see units worth $5,000 or $10,000.


Consider the number of units of life insurance your family will need. The average family with life insurance has about in $235,000 in coverage, according to Heritage Union. Although the amount of insurance a family needs depends on several factors, such as savings and who dies, families usually would need coverage for about five or six years of income to deal with the loss of the breadwinner.


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Units of life insurance are sometimes seen on accidental death benefit and child life insurance, according to Investopedia. In accident insurance, the company offers units worth the same amount as your coverage. If you purchase one unit of accidental death benefits, you would receive $200,000 on a $100,000 policy. Child life insurance units are the same as those for an adult, but much cheaper because children are less likely to die of natural causes. (ref 4 and 5)


The premiums you pay on a unit of life insurance depends on your health, age and habits. You can reduce the cost of your life insurance by quitting smoking, curb alcohol consumption and, if overweight, going on a diet. Shop around for the lowest premium, but make sure you have a plan in place before switching insurers.