Unbundled Life Insurance Policy

DEFINITION of 'Unbundled Life Insurance Policy'

A type of financial protection plan that provides cash to beneficiaries upon the policyholder's death. A unbundled life insurance policy contains a savings and investment component that the policyholder can use during his or her lifetime or pass on to beneficiaries. This does not expire when the policyholder reaches a certain age; and that allows the policyholder to adjust the amount and timing of premium payments and the amount of the death benefit while the policy is in force.


Unbundled life insurance is another word for universal life insurance.

BREAKING DOWN 'Unbundled Life Insurance Policy'

Both whole and universal/unbundled life insurance are types of permanent life insurance and have a cash value component in which a portion of each premium payment is saved and invested on the policyholder's behalf. The other portion of the premium goes toward administrative expenses and the death benefit.


However, there is an important difference between these two types of policies. With whole life insurance, the premiums and death benefit are fixed when the policy is purchased. With universal/unbundled life insurance, the premiums and death benefit can be changed during the life of the policy. This can be a desirable feature if the policyholder's needs change.


The universal/unbundled policy also clearly discloses the policy's administrative fees - also called underwriting and sales expense charges - to the policyholder, whereas a whole life policy does not. Thus, in addition to providing flexibility, universal/unbundled life insurance allows the policyholder to see exactly where his or her premium payments are going.

RELATED TERMS
  1. Cash-Value Life Insurance

    A type of life insurance policy that pays out upon the policyholder's ...
  2. Universal Life Insurance

    A type of flexible permanent life insurance offering the low-cost ...
  3. Whole Life Insurance Policy

    A life insurance contract with level premiums that has both an ...
  4. Voluntary Life Insurance

    A financial protection plan that provides a beneficiary with ...
  5. Developed Premium

    A premium based on estimates of a policyholder’s risk profile ...
  6. Experience Rating Insurance

    The amount of loss that an insured party experiences compared ...
Related Articles
  1. Personal Finance

    Understanding Different Types of Life Insurance

    Understand the various types of life insurance, how each can be used in personal or business financial planning, and for whom they are best-suited.
  2. Personal Finance

    Understanding Taxes on Life Insurance Premiums

    Learn about the tax implications of life insurance premiums, including when they might be taxable and whether they are tax deductible.
  3. Financial Advisor

    Whole or Term Life Insurance: Which Is Better?

    Learn the difference between term life insurance and whole life insurance. Understand when it is beneficial to buy each type of life insurance.
  4. Personal Finance

    Dividend-Paying Whole Life Insurance: What to Know

    Many whole life insurance policies pay dividends. Here are what policyholders need to consider.
  5. Personal Finance

    How Whole Life Insurance Works

    Whole life insurance combines insurance and an investment component for policyholders.
  6. Personal Finance

    How Life Insurance Payouts Work

    Life insurance provides peace of mind to policyholders and their loved ones.
  7. Personal Finance

    Beware the Sneaky Math of Universal Life Insurance

    Universal life insurance's cash value can be a cash cow – if there's any left. Read on to see if it'll work as an income source after you've retired.
  8. Personal Finance

    What's Universal Life Insurance?

    Universal life insurance is permanent life insurance that offers a savings element.
  9. Personal Finance

    6 Ways To Capture The Cash Value In Life Insurance

    If you die with cash value left in your life insurance policy, the money goes to the insurance company – not to your beneficiaries. Here's what to do instead.
  10. Financial Advisor

    Which Life Insurance is Right For You?

    Consumers have choices when it comes to life insurance. Knowing your future needs for cash or retirement can make the difference in what you select.
RELATED FAQS
  1. Do beneficiaries pay taxes on life insurance?

  2. What is the difference between the death benefit and cash value of an insurance policy?

    Understand the difference between the various components of a life insurance policy including the death benefit and a policy's ... Read Answer >>
  3. What is the difference between term and universal life insurance?

    Term life insurance is the most basic of insurance policies. It is nothing more than an insurance policy that provides protection ... Read Answer >>
  4. How can I borrow money from my life insurance policy?

  5. Why would you want a monthly benefit versus a daily benefit?

    An insurance benefit is the amount of money paid to or on behalf of the policyholder. Depending on what kind of insurance ... Read Answer >>
  6. If an individual becomes a policyholder of a variable life insurance policy and ...

    The correct answer is b. Insurance companies issuing variable life policies must allow the holders of those policies to exchange ... Read Answer >>
Trading Center