What Is a Unit of Life Insurance?

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  • Life insurance policies use a plethora of provisions and other terminologies that may seem confusing. One of these terms you may find is unit of insurance.

Life insurance policies can range from a few pages to over 100 pages in length. One thing they all have in common are the plethora of provisions and terminologies that a policyholder must read through to understand the extent of their coverage. One of these many terms is “unit of insurance.” 

Insurance companies calculate their rates and premiums based on the applicable unit of insurance. Even if a particular life insurance provider offers comparatively cheap rates, you may have to purchase dozens of units to attain the amount of coverage you and your family need. Take a look at what constitutes a unit of life insurance and what is meant by phrases such as “per unit deductible” and “master deductible.” 

What Is a Unit of Life Insurance?

A unit of life insurance is the minimum amount of coverage you can purchase, and an increase in coverage will be a multiple of that basic unit. Insurance companies base units on risk factors such as age, gender and various requirements of different states. How much one unit of coverage costs may differ from one provider to another. While most insurers typically deal in units of $1,000, it’s common to see units worth $5,000 or $10,000. 

As you research your potential options for life insurance, you’ll want to carefully consider the number of units of coverage your family needs. This often depends on variables such as savings and how many years of income would be needed to deal with the loss of the breadwinner. 

Because the premiums you pay on a unit of life insurance vary depending on your age and health habits, you can reduce your coverage cost by quitting smoking, curbing alcohol consumption and managing your weight.

What Are Per Unit Deductibles and Master Deductibles?

Terms such as “per unit” and “master” deductibles are most commonly found in property insurance policies. A per unit deductible is a way for insurance providers to shift risk from the master policy to the owner unit’s policy (also known as the HO-6 policy). The master policy — or master deductible — is a set of bylaws that outlines the financial responsibilities of all parties involved in the event of property loss.

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