Modified Life Insurance

Updated: 11 March 2024

What Does Modified Life Insurance Mean?

Modified life insurance works just like a regular life insurance policy but it has lower premium prices for the first three to five years. After that initial introductory period, the premium becomes significantly higher than a standard life insurance policy. Overall, though, the total amount remains the same. The smaller monthly premium payments in the first few years are compensated for during the remainder of the policy term.

The advantage of this type of policy is that it is very budget friendly and ideally suited to families or individuals in the early stage of their careers. They get to pay a lower premium at the start, and then, as their career develops and income increases, they are able to afford the higher premiums.

Modified life insurance is also known as modified whole life insurance.

Insuranceopedia Explains Modified Life Insurance

Modified life insurance is appealing to people who can foresee having more funds available a few years in the future. Someone who just started their career, for example, might anticipate promotions or raises by the time the premium price climbs. This gives them access to higher limits of insurance than they could otherwise afford at that time. During that introductory stage, no cash value or other ancillary features of a whole life policy are accumulated, so if a policy is canceled during that time, insureds do not receive any cash value for premiums paid.

For example, a $1 million modified whole life insurance policy might cost a low introductory premium of $1,000 per year, and then the premium goes up to $10,000 per year after the first five years. At this point, cash value starts accumulating like a regular life insurance policy.

Modified life insurance is also attractive to those who want to focus on dealing with major expenses in the short term, like paying off a car, mortgage or student loan. With the lower premiums in the initial stage, more money can be put toward other expenses.

Other than the significantly lower premium paid during the introductory or “modified” period, modified life insurance policies operate the same way as regular whole life insurance policies; however, some more advanced or niche features are not available with a modified life insurance policy.

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