Unbundled Life Insurance Policy

Updated: 09 June 2023

What Does Unbundled Life Insurance Policy Mean?

An unbundled life insurance policy is a type of permanent life insurance policy that contains an investment and savings component. As well as providing cash to the beneficiaries upon the death of the policyholder, the two components can also pass onto them.

It is also known as universal life insurance.

Insuranceopedia Explains Unbundled Life Insurance Policy

In these policies, the insurance company utilizes a portion of the premium to meet administrative expenses and fund the death benefit, and it invests the remaining premium on behalf of the policyholder.

Universal life insurance policies typically offer policyholder the benefit of guaranteed level premiums throughout the lifetime of the policyholder. In addition, these guaranteed level premiums are oftentimes much lower than the premium costs of equivalent whole life insurance policies. Moreover, the policyholder can change the premium and death benefit, if needed, unlike in a whole insurance policy. Furthermore, unbundled life insurance policies specify the administrative fees, which enables the policyholder to understand where the insurer has utilized the various portions of premium payments. This is not the case in whole life policies.

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