Unbundled Life Insurance Policy

A A A

DEFINITION

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

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. association ...
  2. Life Insurance

    A protection against the loss of income that would result if the insured passed ...
  3. Term Life Insurance

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

    An umbrella term for life insurance plans that do not expire (unlike term life ...
  5. Universal Life Insurance

    A type of flexible permanent life insurance offering the low-cost protection ...
  6. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all of the plan’s ...
  7. Death Master File (DMF)

    Also known as Social Security Death Index. A list of people whose deaths were ...
  8. Level Death Benefit

    A life insurance payout that is the same whether the insured person dies shortly ...
  9. HIPAA Waiver of Authorization

    A legal document that allows an individual’s health information to be used or ...
  10. Guaranteed Issue Life Insurance ...

    A type of financial-protection policy that provides cash to a named beneficiary ...
Related Articles
  1. Can I Get Life Insurance?
    Insurance

    Can I Get Life Insurance?

  2. Top 10 Life Insurance Myths
    Insurance

    Top 10 Life Insurance Myths

  3. Cashing In Your Life Insurance Policy
    Options & Futures

    Cashing In Your Life Insurance Policy

  4. 5 Life Insurance Questions You Should ...
    Options & Futures

    5 Life Insurance Questions You Should ...

  5. What To Expect When Applying For Life ...
    Insurance

    What To Expect When Applying For Life ...

  6. What's the difference between Social ...
    Retirement

    What's the difference between Social ...

  7. 5 Keys To Lower Life Insurance Quotes
    Insurance

    5 Keys To Lower Life Insurance Quotes

  8. On average, what can I expect my private ...
    Home & Auto

    On average, what can I expect my private ...

  9. Why do I need to pay private mortgage ...
    Home & Auto

    Why do I need to pay private mortgage ...

  10. Want To Sell Life Insurance? Read This ...
    Entrepreneurship

    Want To Sell Life Insurance? Read This ...

comments powered by Disqus
Hot Definitions
  1. Quanto Swap

    A swap with varying combinations of interest rate, currency and equity swap features, where payments are based on the movement of two different countries' interest rates. This is also referred to as a differential or "diff" swap.
  2. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  3. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  4. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
  5. Centralized Market

    A financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset.
  6. Balanced Investment Strategy

    A portfolio allocation and management method aimed at balancing risk and return. Such portfolios are generally divided equally between equities and fixed-income securities.
Trading Center