What Is a Unit of Insurance With Colonial Penn?

Life insurance provides financial support to beneficiaries after the insured’s passing. While many insurance providers offer policies with a predetermined face amount, Colonial Penn employs a distinct “unit” system to structure its life insurance offerings. Understanding this unit-based approach is important for anyone considering a policy through this insurer. This unique method influences how coverage is purchased, how premiums are calculated, and the death benefit received.

Understanding the Unit Concept

A unit of insurance with Colonial Penn represents a fixed monthly premium payment, often set at a specific cost, such as $9.95. While the premium per unit remains consistent, the actual death benefit amount associated with that single unit is not fixed; instead, it varies based on several factors. This system allows Colonial Penn to offer guaranteed acceptance policies, which do not require a medical exam or health questions.

The unit concept allows individuals to select the number of units they desire rather than a specific dollar amount of coverage. Each unit provides a portion of the total death benefit, tailored to the policyholder’s individual characteristics at the time of policy issuance. Policyholders can purchase multiple units to build their desired level of coverage, up to a maximum of 25 units in some cases. This helps consumers understand their monthly premium, even if the corresponding coverage amount requires further clarification.

How Units Impact Coverage and Cost

The number of units purchased directly correlates with both the total premium paid and the overall death benefit. For instance, if one unit costs $9.95 per month and provides a certain amount of coverage, purchasing two units would double both the monthly premium to $19.90 and the death benefit amount. This allows policyholders to scale their coverage according to their financial needs and budget. The cost per unit remains constant for a given age and gender, ensuring predictability in monthly payments.

The actual coverage amount that each unit provides fluctuates. This means that a single unit purchased by one individual may yield a different death benefit than a unit purchased by another, depending on their specific circumstances at the time of application. For guaranteed acceptance policies, a two-year waiting period for the full death benefit applies for natural causes of death. During this period, beneficiaries receive a refund of premiums paid if the insured passes away from natural causes.

Factors Influencing Unit Value

The primary factor dictating the death benefit amount a single unit provides is the insured’s age at the time the policy is issued. As individuals age, their actuarial risk increases, meaning an older applicant will receive a lower death benefit per unit compared to a younger applicant for the same premium. This adjustment reflects the insurer’s assessment of longevity and the likelihood of a claim. The underlying coverage amount adjusts to reflect the increased risk.

Gender also plays a role in determining the unit’s value in most states. Women receive a higher death benefit per unit than men of the same age, due to longer life expectancies. Some states, like Montana, however, consider only age when calculating unit value. The state of residence can also influence the specific coverage amounts tied to each unit, reflecting varying regulatory environments and market conditions.

Navigating Your Policy with Units

Understanding Colonial Penn’s unit system helps policyholders make informed decisions about their life insurance coverage. Individuals can determine the number of units to purchase based on their budget and their desired death benefit, often to cover specific costs like final expenses. This flexibility allows for tailoring a policy to meet financial planning goals. Selecting multiple units can help accumulate a larger death benefit that aligns with anticipated needs.

Once a policy is in force, the monthly premium for the purchased units is locked in and will not increase over time. Similarly, the death benefit amount for the acquired units will not decrease due to increasing age or changes in health status. Many of these policies also begin to accumulate cash value after the first year, which can be accessed by the policyholder through loans. This feature provides an additional financial resource that can be utilized during the policyholder’s lifetime, adding to the policy’s utility.