Why is a universal life policy sometimes referred to as an unbundled Life Policy?

A universal life policy is often referred to as an unbundled life policy because it provides a clear breakdown of the various components that make up the policy's overall performance. Specifically, this type of policy allows policyholders to see how interest is earned on the cash value, how the cost of insurance is determined, and what expense charges are associated with maintaining the policy. This transparency enables policy owners to better understand how their payments are allocated and how each aspect affects the overall value of the policy over time.

The design of universal life insurance focuses on flexibility, allowing policyholders to adjust their premium payments and death benefits. However, the unbundled feature provides an additional layer of clarity that distinguishes universal life from other types of life insurance, such as whole life, where these components are typically more intertwined. The ability to see these details empowers policyholders to make informed decisions about their insurance coverage and financial planning.