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Modified Whole Life Insurance Explained

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A modified whole life insurance policy offers a lifetime of coverage for a low initial premium.

While the name may sound similar to whole life insurance, modified whole life insurance does have a few major differences that set it apart from traditional whole life insurance and will impact your finances differently.

Keep reading for more information regarding modified whole life insurance, and what is and isn’t covered.

What is modified whole life insurance?

By 2020, over 54% of Americans were covered by life insurance with an estimated average of those between 35-50 years of age having the most amount of coverage.

Modified whole life insurance is similar to whole life insurance but comes with low introductory premiums that will go up only once between three to five years after your introductory period ends. After this change, your premiums will remain the same for the rest of the length of your policy.

By buying a modified premium policy, it’s a faster way to obtain a higher death benefit sooner and at a more affordable rate, instead of waiting to buy coverage because of the higher costs.

It should be noted that once this rate increases and there is a circumstance where you aren’t able to pay your new rate, your insurance will lapse and be canceled.

What is the difference between modified whole life and standard whole life insurance?

There are two major differences between standard whole life insurance and modified whole life insurance, and that comes down to premiums and cash value.

With standard whole life insurance, your premium will remain the same no matter how long your policy lasts. But this is not the case with modified whole life, which will change after your introductory period ends. Typically this is three to five years after you buy your policy.

Cash value is another small difference between the two, with cash funds being available as soon as your standard whole life policy starts. With modified whole life, you will need to wait until your policy premiums go up to start accruing cash value.

This can be one of the major downsides of a modified policy since you will only be accruing this cash value after three to five years.

This may not seem like a long time, but if you aren’t able to pay your premium after the increase and your policy is canceled, you will not take any cash with you, unlike other traditional life insurance policies.

What does modified life cover?

Modified whole life insurance is a permanent policy that provides full life coverage, with death benefits locked in once your policy starts. It has the same amount of policy benefits as whole life insurance, but without the cash value benefit starting immediately.

Here are some other advantages to modified your whole life:

  • Minimal underwriting. Most carriers use a limited medical underwriting process, or none at all, to approve applicants who would otherwise be disqualified from traditional whole life insurance.
  • Lower up-front costs. These policies charge lower premiums for the first few years of the policy, which makes them appealing to those who anticipate an increase in their income over the coming years.
  • Uniform value. The death benefit doesn’t change over the life of your modified policy and is locked in with your first payment towards your policy.
  • Lifetime coverage. This coverage is for the entire lifetime of the insured.

Modified whole life isn’t the best fit for everyone, but it does offer coverage for situations that traditional standard whole life insurance wouldn’t cover, such as illness or pre-existing conditions.

What are the pros and cons of getting modified whole life insurance?

Modified whole life insurance typically appeals to anyone seeking an affordable option for life insurance coverage, especially with a strict budget in mind.

However, the downside to this is that once your premium increases (sometimes double or triple of what you were paying during your introductory period), you’re stuck paying for a pretty expensive policy, and only then are you accruing cash value for it.

Most people who seek affordable options when it comes to life insurance have been turning to convertible term life instead, which gives you the option to convert it to whole life later on.

This gives you the same kind of advantages as a modified whole life without the hefty increase in price in the future.

Should I buy modified whole life insurance?

It really depends on your circumstances, but in most cases, there are other options for life insurance that will give you better benefits and won’t increase in price later on. These can be noted with both term life and standard whole life policies.

However, if you feel that the premium for a modified whole life policy isn’t a deal-breaker, modified whole life does offer an array of value as well as coverage for those individuals who would otherwise be denied traditional life insurance.


Katherine Warnock

Katherine is a freelance editorial writer with a degree in Advanced Technical and Development Writing from SUNY Adirondack. She has years experience writing on topics such as finance, insurance, and personal development.

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