What Are Insurance Units?

Throughout the life insurance industry, myriad terms are often used interchangeably, or entirely differently in one region vs. another. However, in the vast majority of states, life insurance units carry the same meaning with nearly every policy contract.

One “unit” of life insurance usually equals $1,000 worth of coverage for most life insurance carriers. Some policies are arranged and sold in terms of coverage units, and premiums depend on the number of units requested.

Guaranteed issue life insurance policies present the most common instance, in which coverage is described in units as opposed to total face amount. Buying this type of product allows for easy increases or decreases in death benefits with the addition or removal of insurance units.

Aside from guaranteed issue life insurance policies, a rider on permanent products from traditional carriers is perhaps the only other place where coverage may be described in unit terms. Nearly every permanent life insurance policy permits the addition of a Child Term Rider, which is little more than final expense coverage. Child Term Riders added to permanent policies typically involve choosing an appropriate number of units from one to 10, with 10 units equaling $10,000.