What is Modified Whole Life Insurance?

Life insurance is very important for anyone who likes to be prepared for the future. It gives you a back up plan and acts as a savior for your family if you were to suddenly pass away.

One of the types of life insurance policies also include modified whole life insurance.

What is Modified Whole Life Insurance?

As per the modified whole life insurance definition, it is very similar to a traditional whole life insurance. It has the same features and the only difference between the two is how the premiums have been structured.

In a traditional whole life insurance, the premiums remain the same throughout the life of the policy. However, in a modified whole life insurance policy, the premiums are lower in the first few years after which they are likely to increase. The few years where you get low premiums depends on the insurance company that issued you the policy. However, it is most likely to be a period of five to ten years.

This insurance provides a mutual benefit to the policyholder and the insurance company. The policyholder gets to pay lower premiums compared to other policies. The insurance company is also at peace since the risk of dying is not as much during the first few years of the policy. When the risk of dying increases, the insurance companies raise the cost of the premiums. Moreover, for the company, it is an added advantage as with a modified whole life policy, there is more money being paid through the course of the policy than with other life insurance policies.

However, it should be noted that even though the premiums are lower in the first few years and are subjected to change through the life of the policy, the face value of modified coverage whole life insurance essentially stays the same.

This policy also has a cash surrender value, same as all other basic life insurance policies have. Since the premiums are lower in the beginning, the cash value is also accrued at a slower pace.

Who Can Benefit from Modified Whole Life Insurance?

Modified whole life insurance is ideal for individuals who expect an increase in their income over time, even if it’s not immediate. This policy provides lifelong coverage, ensuring protection for your beneficiaries.

People in the early stages of their careers, those anticipating financial growth, or parents with children nearing independence are great candidates. It’s also a good fit for families with a single income, where the other parent might start earning later.

Entrepreneurs often choose this insurance when their businesses are young and their budgets are limited, but they anticipate future growth. Additionally, this policy works well for individuals on a budget who want affordable coverage early in life. By applying while young and healthy, they secure lower premiums and lock in long-term insurability.

For younger applicants, the lower premiums are especially appealing. A clean bill of health leads to favorable underwriting, and the premiums remain affordable.

In essence, it is an effective and affordable way to meet long-term financial goals, while offering guaranteed protection for the future. It allows individuals to safeguard their families today, with the promise of flexibility for tomorrow.

How To Buy A Modified Whole Life Policy

Just like with other forms of insurance, comparing rates by requesting information from different companies is essential. Once you have decided what company is better suited for you, you will need to work with an agent so you can get an application turned in, get underwriting done and you will have a policy delivered to you. It is likely that with modified whole life policies that you will get low rates and coverage with no waiting period.

Modified Whole Life Insurance: Pros and Cons

Just like other life insurance policies, modified whole life insurance also has some pros and cons. We’ll look at the pros first.

Pros of Modified Whole Life Insurance:

The best part is that individuals with serious health issues can secure a new coverage plan without any hassle. If you know anything about insurance, you would know it is hard for people with poor health to secure a good coverage rate. If they do stumble across a company willing to offer them life insurance, the premiums would be exponentially high.

However, with this insurance, you would not have to worry about medical underwriting as most companies have limited to no underwriting.

Cons of Modified Whole Life Insurance:

This insurance has two major drawbacks. One is the waiting period and one, the premium rates. Since these policies take on people with serious health conditions which are labeled high risk, they have higher premiums and a longer waiting period of 2-3 years before the death benefit could be paid out.