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                                                                   EXHIBIT 10.12


VESTA INSURANCE GROUP, INC.
                        NON-EMPLOYEE DIRECTOR STOCK PLAN
   (adjusted to give effect to 3-for-2 stock split effected January 22, 1996)

            (As amended by the Board of Directors on January 1, 2000
           and ratified by the Company's stockholders on May 8, 2000)


     Section 1.  Purpose of the Plan.   The purpose of the Vesta Insurance
                 -------------------
Group, Inc. Non-Employee Director Stock Plan (the "Plan") is to provide stock
based compensation to eligible directors of Vesta Insurance Group, Inc. (the
"Company") in order to encourage the highest level of director performance and
to promote long-term shareholder value by providing such directors with a
proprietary interest in the Company's success and progress through grants of
shares of the Company's Common Stock ("Common Stock") which are restricted in
accordance with the terms and conditions set forth below ("Restricted Shares")
and by granting them options to purchase shares of Common Stock ("Options").

     Section 2.  Certain Definitions.
                 -------------------

(a)  "Board" means the Board of Directors of the Company.
(b)
(c)  "Change of Control" has the meaning set forth in Section 8(b) hereof.
(d)
(e)  "Change of Control Price" shall have the meaning set forth in Section 8(d)
     hereof.
(f)
(g)  "Code" means the Internal Revenue Code of 1986, as amended.
(h)
(i)  "Committee" means the Compensation Committee of the Board.
(j)
(k)  "Common Stock" means the common stock of the Company.
(l)
(m)  "Company" means Vesta Insurance Group, Inc., a Delaware corporation.
(n)
(o)  "Director Fee" means the annual retainer fee or other attendance fees
payable to a Non-Employee Director in accordance with the Company's regular
payment practices with respect to service on the Board.
(p)
(q)  "Disability" means a permanent and total disability as determined under
procedures established by the Committee for purposes of the Plan. The
determination of Disability for purposes of this Plan shall not be construed to
be an admission of disability for any other purpose.
(r)
(s)  "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(t)  "Fair Market Value" means, as of any given date, the closing price of the
Common Stock on the New York Stock Exchange Composite Tape or, if not listed on
such exchange, any other national exchange on which the Common Stock is listed
or on NASDAQ. If
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there is no regular public trading market for such stock, the Fair Market Value
of the Common Stock shall be determined by the Committee in good faith.
(u)
(v)  "Non-Employee Director" means each member of the Board who is not an
employee of the Company or any of its subsidiaries at the date of each grant or
award.
(w)
(x)  "Normal Retirement" means the date specified by the Board as the retirement
date for members of the Board.
(y)
(z)  "Options" means options to purchase shares of Common Stock granted pursuant
to Section 6 of the Plan.
(aa)
(bb) "Plan" means the Vesta Insurance Group, Inc. Non-Employee Director Stock
Plan.
(cc)
(dd) "Potential Change of Control" has the meaning set forth in Section 8(c)
hereof.
(ee)
(ff) "Payment Date" means the date on which the Company pays Director Fees or
issues restricted stock in lieu thereof in accordance with Section 7 hereof.
(gg)
(hh) "Restricted Stock" means shares of Common Stock granted pursuant to Section
7 of the Plan.
(ii)
(jj) "Restricted Stock Agreement" means a written agreement evidencing an award
of Restricted Stock and setting forth the terms and conditions of such award.
(kk)
(ll) "Rule 16b-3" means Rule 16b-3, as currently in effect or as hereinafter
amended or modified, promulgated under the Exchange Act.
(mm)
(nn) Section 3.  Administration of the Plan.
                 --------------------------
(oo)
(pp) The Plan shall be administered by the Compensation Committee of the Board
of Directors of the Company. Grants of Initial Options and Annual Options under
the Plan and the amount and nature of the awards of Restricted Stock shall be
made automatically as provided in Section 6 and Section 7, respectively, and the
number of shares of Common Stock which may be subject to Initial Options and
Annual Options may be increased or decreased in the Committee's discretion as
provided in Section 6(d). The Compensation Committee shall have full authority
to interpret the Plan, to promulgate such rules and regulations with respect to
the Plan as it deems desirable, and to make all other determinations necessary
or appropriate for the administration of the Plan, and such determinations shall
be final and binding upon all persons having an interest in the Plan.
(qq)
(rr) Section 4.  Common Stock Subject to the Plan.
                 --------------------------------
(ss)

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(tt)            (a) The total number of shares of Common Stock reserved and
available for distribution under the Plan shall be 780,000. Such shares may
consist, in whole or in part, of authorized and unissued shares or treasury
shares. If any shares of Common Stock that have been optioned cease to be
subject to option, or if any shares subject to any Restricted Stock award
granted hereunder are forfeited or such award otherwise terminates, such shares
shall again be available for distribution in connection with future awards under
the Plan.
(uu)
(vv)            (b) In the event of any merger, reorganization, consolidation,
recapitalization, Common Stock dividend, or other change in corporate structure
affecting the Common Stock, a substitution or adjustment shall be made in the
aggregate number of shares reserved for issuance under the Plan, in the number
and option price of shares subject to outstanding Stock Options granted under
the Plan and in the number of shares subject to Restricted Stock awards granted
under the Plan as may be determined to be appropriate by the Committee, in its
sole discretion, provided that the number of shares subject to any award shall
always be a whole number.
(ww)
(xx)    Section 5.  Participation.
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(yy)
(zz)    Each Non-Employee Director shall be eligible to participate in the Plan.
(aaa)
(bbb)   Section 6.  Non-Qualified Stock Options.
                    ---------------------------
(ccc)
(ddd)           General.  Options granted to Non-Employee Directors under the
                -------
Plan shall be options which are not intended to be "incentive stock options"
within the meaning of Section 422 of the Code.
(eee)
(fff)           Annual Grant of Options. Options covering 5,000 shares of Common
                -----------------------
Stock shall be granted to each Non-Employee Director automatically on the first
day of each calendar year in which the Common Stock is publicly traded on the
New York Stock Exchange (an "Annual Option"). If a Non-Employee Director who has
not previously served on the Board during a particular calendar year is elected
to the Board on a day during a calendar year which falls after the First Trading
Day, options covering 5,000 shares of Common Stock shall be granted to such Non-
Employee Director automatically on the first day following such Directors's
election to the Board in which the Common Stock is publicly traded on the New
York Stock Exchange (an "Initial Option").
(ggg)
(hhh)           Discretion to Vary Option Size. Notwithstanding any provision of
                ------------------------------
the Plan to the contrary, and subject to the limitations set forth below, the
Board or the Committee may, in its sole discretion, increase or decrease the
number of shares of Common Stock subject to Initial Options or Annual Options
granted pursuant to Section 5(b) or 5(c), if the exercise of such discretion
would not preclude any transaction involving the Option from being exempt from
Section 16(b) of the Exchange Act pursuant to Rule 16b-3. In order to ensure the
Committee's ability to induce highly qualified persons to join the Board as Non-
Employee Directors, the Committee may increase the number of shares of Common
Stock subject to an Initial Option without limitation. In order to safeguard
against potentially self-interested transactions involving

                                       3
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persons already serving as directors, however, the Committee may not increase
the number of shares of Common Stock subject to an Annual Option above 10,000
(subject to adjustment in accordance with Section 4(b) above).
(iii)
(jjj)      Terms of Options. Options granted under the Plan shall be evidenced
           ----------------
by a written agreement in such form as the Committee shall from time to time
approve, which agreements shall comply with and be subject to the following
terms and conditions:
(kkk)
(i)              Option Price. The option price per share of Common Stock
                 ------------
purchasable under an Option shall be 100% of the Fair Market Value of the Common
Stock on the date of the grant of the Option.
(ii)
(iii)            Option Term. Each Option shall be exercisable for a term of
                 -----------
ten (10) years from the date such Option is granted (subject to prior
termination as hereinafter provided).
(iv)
(v)              Exercisability. Except as provided in Sections 8 and 9, Options
                 --------------
shall not become first exercisable by their terms until the expiration of six
(6) months from the date of the grant of the Option.
(vi)
(vii)            Method of Exercise. Options may be exercised in whole or in
                 ------------------
part at any time during the option period by giving written notice of exercise
to the Company specifying the number of shares to be purchased, accompanied by
payment in full of the purchase price, in cash, by check or such other
instrument as may be acceptable to the Committee. Payment in full or in part may
also be made in the form of unrestricted Common Stock already owned by the
optionee (based on the Fair Market Value of the Common Stock on the date the
Option is exercised). No shares of Common Stock shall be issued until full
payment therefor has been made. An optionee shall have the right to dividends or
other rights of a stockholder with respect to shares subject to an Option which
the optionee has given written notice of exercise and has paid in full for such
shares.
(viii)
(ix)             Non-transferability of Options; Exception. Except as otherwise
                 -----------------------------------------
set forth in this Section 6(d)(v), no Option shall be transferable by the
optionee otherwise than by will or by the laws of descent and distribution, and
all Options shall be exercisable, during the optionee's lifetime, only by the
optionee. The Committee shall have the discretionary authority, however, to
grant Options which would be transferable to members of an optionee's immediate
family, including trusts for the benefit of such family members and partnerships
in which such family members are the only partners. For purposes of Section 9, a
transferred Option may be exercised by the transferee only to the extent that
the optionee would have been entitled had the option not been transferred.
(x)
(xi)
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(xii)   Section 7. Restricted Stock.
                   ----------------
(lll)                 Awards. Each Non-Employee Director may elect, pursuant to
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a written irrevocable election, to receive Restricted Stock in lieu of part or
all of such Non-Employee Director's Director Fee. Such election shall be
effective beginning on the Payment Date immediately following the date which is
six (6) months after the date of such election. The number of shares of
Restricted Stock granted to a Non-Employee Director pursuant to such election
shall be equal to the dollar amount of Director Fees which the Non-Employee
Director has elected not to receive, divided by seventy-five percent (75%) of
the Fair Market Value of the Common Stock as of each applicable Payment Date.
Such an election by a Non-Employee Director shall continue in effect until the
earlier of (i) such Non-Employee Director's termination as a director of the
Company and (ii) the Payment Date immediately following the date which is six
(6) months following the receipt by the Company of a written election by such
Non-Employee Director to discontinue receiving Restricted Stock in lieu of all
or a portion of such Non-Employee Director's Director Fees or a written election
by a Non-Employee Director to change the amount of such election.
(mmm)
(nnn)      Awards and Certificates.
           -----------------------
(ooo)
(i)             A Non-Employee Director who elects to receive Restricted Stock
pursuant to this Section 7 shall not have any rights with respect to such award,
unless and until such recipient has executed a Restricted Stock Agreement and
has delivered a fully executed copy thereof to the Company, and has otherwise
complied with the then applicable terms and conditions.
(ii)
(iii)           A stock certificate in respect of shares of Restricted Stock
shall be issued in the name of each Non-Employee Director who receives
Restricted Stock. Such certificate shall be registered in the name of the Non-
Employee Director, and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award, substantially in the
following form:
(iv)
          "The transferability of this certificate and the shares of stock
          represented hereby are subject to the terms and conditions (including
          forfeiture) of the Vesta Insurance Group, Inc. Non-Employee Director
          Stock Plan and a Restricted Stock Agreement entered into between the
          registered owner and the Company.  Copies of such Plan and Agreement
          are on file in the offices of the Company, Post Office Box 43360, 3760
          River Run Drive, Birmingham, Alabama  35243."

(i)             The Committee shall require that the stock certificates
     evidencing such shares be held in custody by the Company until the
     restrictions thereon shall have lapsed, and that, as a condition of any
     Restricted Stock award, the Non-Employee Director shall have delivered a
     stock power, endorsed in blank, relating to the Common Stock covered by
     such award.
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(ii)
(b)       Restrictions and Conditions.  The shares of Restricted Stock awarded
          ---------------------------
pursuant to this Section 7 shall be subject to the following restrictions and
conditions:
(i)             Subject to the provisions of this Plan and the Restricted Stock
Agreements, a Non-Employee Director shall not be permitted to sell, transfer,
pledge or assign shares of Restricted Stock awarded under the Plan for a period
of two (2) years following the effective date of the Restricted Stock Agreement
pursuant to which such shares of Restricted Stock were awarded.
(ii)
(iii)           Except as provided in Section 7(b), a Non-Employee Director
shall have, with respect to the shares of Restricted Stock, all of the rights of
a stockholder of the Company, including the right to vote and to receive any
dividends. Dividends paid in stock of the Company or stock received in
connection with a stock split with respect to Restricted Stock shall be subject
to the same restrictions as on such Restricted Stock. Certificates for shares of
unrestricted Common Stock shall be delivered to the Non-Employee Director
promptly after, and only after, the period of forfeiture shall expire without
forfeiture in respect of such shares of Restricted Stock.
(iv)
(v)  Section 8.  Change of Control.  The following acceleration and valuation
                 -----------------
provisions shall apply in the event of a "Change of Control" or "Potential
Change of Control," as defined in this Section 8:

(c)             In the event of a "Change of Control," as defined in Section
8(b) below, unless otherwise determined by the Committee or the Board in writing
at or after the grant of awards hereunder, but prior to the occurrence of such
Change of Control, or, if and to the extent so determined by the Committee or
the Board in writing at or after the grant of awards hereunder (subject to any
right of approval expressly reserved by the Committee or the Board at the time
of such determination) in the event of a "Potential Change of Control," as
defined in Section 8(c) below:
(d)
(i)         any Options awarded under the Plan not previously exercisable and
vested shall become fully exercisable and vested;
(ii)
(iii)       the restrictions applicable to any Restricted Stock awards under the
Plan shall lapse and such shares and awards shall be deemed fully vested; and
(iv)
(v)         the value of all outstanding Options and Restricted Stock awards
shall, to the extent determined by the Committee or after grant, be cashed out
on the basis of the "Change of Control Price" (as defined in Section 8(d) below)
as of the date the Change of Control occurs or Potential Change of Control is
determined to have occurred, or such other date as the Committee may determine
prior to the Change of Control or Potential Change of Control.
(vi)
(e)      For purposes of Section 8(a) above, a "Change of Control" means the
happening of any of the following:
(f)
<PAGE>

(i)        when any "person," as such term is used in Sections 13(d) and 14(d)
of the Exchange Act (other than the Company, Torchmark Corporation or its
subsidiary, or any Company employee benefit plan, including its trustee), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing twenty
percent (20%) or more of the combined voting power of the Company's then
outstanding securities;
(ii)
(iii)      the occurrence of any transaction or event relating to the Company
required to be described pursuant to the requirements of Item 6(e) of Schedule
14A of Regulation 14A of the Securities and Exchange Commission under the
Exchange Act;
(iv)
(v)        when, during any period of two (2) consecutive years during the
existence of the Plan, the individuals who, at the beginning of such period,
constitute the Board cease, for any reason other than death, to constitute at
least a majority thereof, unless each director who was not a director at the
beginning of such period was elected by, or on the recommendation of, at least
two-thirds (2/3) of the directors at the beginning of such period; or
(vi)
(vii)      the occurrence of a transaction requiring stockholder approval for
the acquisition of the Company by an entity other than the Company or a
subsidiary of Torchmark Corporation through purchase of assets, or by merger, or
otherwise.
(viii)
(g)    For purposes of Section 8(a) above, a "Potential Change of Control" means
the happening of any of the following:
(h)
(i)        the entering into an agreement by the Company, the consummation of
which would result in a Change of Control of the Company as defined in Section
8(b) above; or
(ii)
(iii)      the acquisition of beneficial ownership directly or indirectly, by
any entity, person or group (other than the Company, Torchmark Corporation, a
subsidiary of Torchmark Corporation, or any Company employee benefit plan
(including its trustee)) of securities of the Company representing five percent
(5%) or more of the combined voting power of the Company's outstanding
securities and the adoption by the Board of Directors of a resolution to the
effect that a Potential Change of Control of the Company has occurred for
purposes of this Plan.
(iv)
(i)    For purposes of this Section 8, "Change of Control Price" means the
highest price per share paid in any transaction reported on the New York Stock
Exchange, or paid or offered in any transaction related to a potential or actual
Change of Control of the Company at any time during the preceding sixty (60) day
period as determined by the Committee, except that, in the case of Options, such
price shall be based only on transactions reported for the date on which the
Committee decides to cash out such Options.
(j)
(k)  Section 9.  Termination of Directorship.
                 ---------------------------
(l)
<PAGE>

(m)   Termination by Reason of Disability or Death. Upon the termination of a
      --------------------------------------------
Non-Employee Director by reason of Disability or death, (i) any Restricted Stock
held by such Non-Employee Director shall immediately vest and all restrictions
applicable to such shares shall lapse, or, in the case of death, the Restricted
Stock granted to such Non-Employee Director shall immediately vest in the Non-
Employee Director's beneficiary or estate and all restrictions applicable to
such shares shall lapse, and (ii) any Options held by such optionee may
thereafter be immediately exercised, notwithstanding the provisions of Section 6
hereof, by the optionee or, in the case of death, by the legal representative of
the estate or by the legatee of the optionee under the will of the optionee,
until the expiration of the stated term of such Options.
(n)
(o)   Termination by Reason of Normal Retirement.  If an optionee's status as a
      ------------------------------------------
Non-Employee Director with the Company terminates by reason of Normal
Retirement, any Options held by such optionee shall become immediately
exercisable and may thereafter be exercised until the expiration of the stated
term of the Options. If the retired optionee dies while any Options are still
outstanding, such Options may be exercised by the legal representative of the
estate or by the legatee of the optionee under the will of the optionee, until
the expiration of the stated term of the Options.
(p)
(q)   Other Termination.  Upon the termination of a Non-Employee Director with
      -----------------
the Company for any reason other than Disability or death, (i) any Restricted
Stock held by such Non-Employee Director which is not fully vested as of the
date of termination shall be forfeited by the Non-Employee Director (provided
that in the event a Non-Employee Director's directorship is terminated as the
result of special hardship circumstances, the Board may, in its sole discretion,
waive in whole or in part any or all remaining restrictions with respect to such
Non-Employee Director's shares of Restricted Stock), and (ii) any Options held
by such optionee may thereafter be exercised, notwithstanding the provisions of
Section 6 hereof, until the expiration of the stated term of such Options.
(r)
(s)  Section 10.  Termination or Amendment of the Plan.  The Board may suspend
                  ------------------------------------
or terminate the Plan or any portion thereof at any time, and the Board may
amend the Plan from time to time as may be deemed to be in the best interests of
the Company; provided, however, that no such amendment, alteration or
discontinuation shall be made (a) that would impair the rights of a Non-Employee
Director with respect to Options and Restricted Stock theretofore awarded,
without such person's consent, or (b) without the approval of the stockholders
(i) if such approval is necessary to comply with any legal, tax or regulatory
requirement, including any approval requirement which is a prerequisite for
exemptive relief from Section 16(b) of the Exchange Act; or (ii) to increase the
maximum number of shares subject to this Plan, increase the maximum number of
shares issuable to any Non-Employee Director under this Plan, or change the
definition of persons eligible to receive awards under this Plan, or (c) if the
Plan has been amended within the preceding six (6) months, unless such amendment
is necessary to comply with changes in the Internal Revenue Code of 1986, as
amended, or the Employee Retirement Income Security Act of 1974, as amended, or
rules promulgated thereunder.
(t)
<PAGE>

(u)  Section 11. Section 16. It is intended that the Plan and any grants made to
                 ----------
a person subject to Section 16 of the Exchange Act meet all of the requirements
of Rule 16b-3. If any provision of the Plan or any award hereunder would
disqualify the Plan or such award, or would otherwise not comply with Rule 16b-
3, such provision or award shall be construed or deemed amended to conform to
Rule 16b-3.
(v)
(w)  Section 12.  General Provisions.
                  ------------------
(x)
(y)      No Right of Continued Service. Nothing in the Plan shall be deemed to
         -----------------------------
create any obligation on the part of the Board to nominate any Non-Employee
Director for reelection by the Company's stockholders.
(z)
(aa)     Payment of Taxes.  The Company shall have the right to require, prior
         ----------------
to the issuance or delivery of any Restricted Stock or issuance and delivery of
Common Stock upon the exercise of Options, payment by the Non-Employee Director
of any taxes required by law with respect to the issuance or delivery of such
shares. Such amount may be paid in cash, in shares of Common Stock previously
owned by the Non-Employee Director, by withholding a portion of the shares of
Common Stock that otherwise would be distributed to such Non-Employee Director
upon delivery of the Restricted Stock or exercise of an Option or a combination
of cash and shares of Common Stock.
(bb)
(cc)     Shares.  The shares of Common Stock granted as Restricted Stock or
         ------
issued upon the exercise of Options under the Plan may be either authorized but
unissued shares or shares which have been or may be reacquired by the Company,
as determined from time to time by the Board.
(dd)
(ee)     Governing Law.  The Plan and all actions taken thereunder shall be
         -------------
governed by and construed in accordance with the laws of the State of Delaware
(other than its law respecting choice of law). The Plan shall be construed to
comply with all applicable law, and to avoid liability to the Company or a Non-
Employee Director, including, without limitation, liability under Section 16(b)
of the Exchange Act.
(ff)
(gg)     Headings.  The headings contained in this Plan are for reference
         --------
purposes only and shall not affect the meaning or interpretation of this Plan.
(hh)
(ii)     Severability. If any provision of this Plan shall for any reason be
         ------------
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision hereby, and this Plan shall be construed as if
such invalid or unenforceable provision were omitted.
(jj)     Successors and Assigns.  This Plan shall inure to the benefit of and be
         ----------------------
binding upon each successor and assign of the Company. All obligations imposed
upon a Non-Employee Director, and all rights granted to the Company hereunder,
shall be binding upon the Non-Employee Director's heirs, legal representatives
and successors.
(kk)
<PAGE>

(ll)
(mm)
(nn)