Unbundled Life Insurance Policy

AAA

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.

INVESTOPEDIA EXPLAINS '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. Group Life Insurance

    Life insurance offered by an employer or large-scale entity (i.e. ...
  2. Universal Life Insurance

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

    A protection against the loss of income that would result if ...
  4. Term Life Insurance

    A policy with a set duration limit on the coverage period. Once ...
  5. Permanent Life Insurance

    An umbrella term for life insurance plans that do not expire ...
  6. Commercial Package Policy (CPP)

    An insurance policy that combines coverage for multiple perils, ...
RELATED FAQS
  1. No results found.
Related Articles
  1. Insurance

    Can I Get Life Insurance?

    Find out what you can do to get the coverage you need for the right price.
  2. Insurance

    Top 10 Life Insurance Myths

    The most difficult aspect of this complex product is determining how much coverage you need and why.
  3. Options & Futures

    Cashing In Your Life Insurance Policy

    Tough times call for desperate measures, but is raiding your life insurance policy even worth considering?
  4. Options & Futures

    5 Life Insurance Questions You Should Ask

    Confused about $1 million dollar insurance advertising claims? Decide whether they'll pay off for you.
  5. Insurance

    What To Expect When Applying For Life Insurance

    Before jumping into a policy, check out these tips on how to score the best plan for you.
  6. Insurance

    Life Insurance: How Much Does Age Raise Your Rate?

    If you need life insurance, try to get it before your next birthday. Here's why.
  7. Insurance

    What Happens If Your Insurance Company Goes Bankrupt?

    When insurance companies go bankrupt or face financial difficulty, it's bad news for policy holders.
  8. Insurance

    How to Use a Waiver of Subrogation

    A waiver of subrogation means that a party to a contract waives the right to allow someone (usually an insurance company) to sue the other party to the contract in case of a loss.
  9. Insurance

    Should You Borrow From Your Life Insurance?

    A loan against the cash value of your life insurance isn't the best way to raise money – but sometimes it's the best choice you have. How to decide.
  10. Insurance

    Life Insurance: How Long Does It Take To Get Paid?

    How to file for a life insurance payout – and how long it takes to receive it. Plus, new ways to plan for payments that provide an income stream.

You May Also Like

Hot Definitions
  1. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  2. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  3. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  4. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  5. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  6. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
Trading Center