Guide to Modified Whole Life Insurance and The 4 Things They Don’t Tell You

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Choosing an appropriate life insurance policy is not an easy job, especially if you’re suffering from health conditions or looking after your loved ones. Insurance companies will offer you everything: whole life insurance, term life insurance, universal life insurance, higher premiums, level premiums, death benefit, life coverage, and so on – the list doesn’t end.

And to add it to the top of the list – now you’ve heard about Modified Whole Life Insurance.

One thing is sure – there is a reason people choose a modified whole life insurance policy amongst all other types of life insurance, and we’re going to help you make that choice for yourself.

In this article, you will learn:

  • What is Modified Whole Life Insurance
  • How does Modified Whole Life Insurance work
  • What are the pros of a Modified Whole Life Insurance policy
  • What are the cons of Modified Whole Life Insurance policy
  • What are the alternatives to Modified Whole Life Insurance
  • What are the costs of Modified Whole Life Insurance policy
  • When you should buy a Modified Whole Life Insurance policy.

By the time you finish reading this article, you will be clear about what modified whole life insurance is and the best choice for you. Let’s begin!

What is Modified Whole Life Insurance?

Modified Whole Life Insurance — also known as Modified Premium Whole Life insurance, Graded Life Insurance, or Return of Premium Whole Life Insurance — is a type of permanent life insurance that offers a much lower premium for the first few policy years in exchange for a higher premium after an introductory period.

“Modified” whole life insurance has an initial “modified” level of coverage that typically lasts a specific number of years at the beginning of the insurance policy. The waiting period usually lasts the first two years (with some companies three years), during which the life insurance company only refunds the premium payments plus interest for any non-accidental death. When the waiting period ends, the full benefit is payable for any reason.

The waiting period can last from two to three years, and it depends on the life insurance contract with the insurance company. The interest granted (the amount you’ve made based on the premiums) varies by the company as well, so it goes to the list of things that need to be checked with the insurer before signing with the company. The variety is wide – from 8% to 30%, but you can usually expect 10% interest on your premiums.

In other words, in case of death during the waiting period, the payout would be 10% more of the premiums you have paid so far. You can often hear that modified whole life insurance plans are also called “final expense insurance“, “funeral insurance”, or “burial insurance”.

Call them however you prefer, but bear in mind that modified whole life insurance plans are usually bought by people with health conditions, as they represent a life insurance policy with limited underwriting. This makes them one of the most accessible insurance options.

The spirit of this type of life insurance is budget-friendliness. Besides health conditions, families, where breadwinners are in the early stages of their career, are also policyholders, as they expect a significant pay raise shortly, so the waiting period allows them to afford the insurance product. This product may also work out well for someone who has other financial obligations that they plan to retire within a few years.

Benefits of Modified Whole Life Insurance

There are a couple of benefits that make this life insurance policy unique. We went through them all and highlighted the most significant ones for you. Let’s go one by one and see why people choose modified whole life insurance.

Eligible for more people to qualify

On the contrary to most term life insurance policies, modified whole life insurance is suitable for almost everyone who can not qualify for other insurance products. In case of suffering from chronic health conditions, you would still become a policy owner with premium rates you can afford. Thanks to the less restrictive underwriting process, the insurance agent can approve your qualification and grant you insurance coverage.

Minimized payments in the early years of the policy

Many people choose not to purchase a whole life insurance policy because it comes with higher premiums. If you do not pay them regularly, the insurance contract may terminate, leaving you without any savings.

With modified whole life insurance, there is a significant benefit of not paying the premiums in the early years of the policy. This is known as the waiting period that usually lasts two to three years, depending on the company.

The good news is that not paying the total premium amount in the early years of the policy does not affect the face amount or face value – the death benefit paid to the beneficiary upon the insured’s death.

Coverage amount and Premium amount are guaranteed

Once approved for coverage, your premium is locked in. There’s never a price increase, unlike with term insurance life plans. You can relax and plan your finances for the future, as you know the amount of premiums you’ll be obliged to pay.

Another good news is that it provides comprehensive protection throughout your entire life. Modified whole life insurance plans never cancel due to age or health, so you don’t have to worry about this. From the first day you sign the contract, you are covered comprehensively for the rest of your life.

Helps build Cash Value

Cash Value is one of the most important benefits of the life insurance policy. It is the same for modified whole life insurance.

Whenever you pay a premium, a certain amount of money is put away as a cash value that builds over the years. In case you decide to cancel the insurance contract for any reason, you will still be able to access your cash value – the premiums you have paid over the years would not just go up in smoke.

An additional benefit is that you can cash out some of your premiums out of cash value without terminating the contract. Accessing your cash at any time allows you to borrow the money against your life insurance with a much lower interest rate and become your own bank.

Cash Value Is Tax-Deferred

As if Cash Value was not a valuable benefit itself, now you learn that it is tax-deferred. The amount in your cash value will not be taxed over the years. Although, if you decide to invest the money from cash value into somewhere else — and you start profiting from it — you can expect to be taxed as per usual. Until then, your cash value is tax-deferred, and you are worry-free.


You’ve already noticed that premiums are flexible – meaning you will not be expected to pay the premiums (or will be expected to pay lower ones) in the early years of the policy, while they will increase and stabilize after the waiting period. This is a significant difference in comparison to other insurance products.

An additional benefit is that there is flexibility when determining full coverage of your insurance. Make sure to understand all of the conditions and possibilities before signing the contract. Your insurance agent should give you all the information you need to buy the most suitable life insurance policy.

Downsides of Modified Whole Life Insurance

There are always two sides to the coin. It’s the same with modified whole life insurance – there are some cons or downsides that might make you think twice about whether this insurance policy is the right one for you. Here are the most significant downsides you should be aware of.

Premium Rises after a Set Period

Even though there is an element of level premiums, these premiums are not the same as in the early years of the policy. This might be suitable for some clients, but for others, it might not make any sense. Some insurance companies raise the premium amount after the waiting years so disruptively that it over-powers the initial low premium years.

Another thing to bear in mind is that when comparing modified life insurance to traditional life insurance, a significant difference is the premium amount. Modified whole life insurance will bring more benefits, but it will also get a higher premium amount in the first place.

The long time needed to build Cash Value

Although cash value sounds perfect, there is a fact we should be aware of – it takes years to build cash value. In other words, you won’t be able to access your cash value and its benefits in the first years of the policy. You should think twice about whether having cash value built over the years is a good enough benefit of modified whole life insurance; once you know you won’t be able to access it right away.

No Full Natural Death Benefit Coverage

In case of a non-accidental death within the waiting period (usually first two to three years, but can go up to five years with some companies), your beneficiaries won’t receive the full death benefit. Instead, they would receive paid-in premiums plus interest (interest depends on the contract with the company).


Even though that modified whole life insurance is far more flexible than the traditional ones, it also comes with more complexity. This means that it would take you more time to understand everything about modified whole life insurance to make the right choice for you and your loved ones.

Alternatives to Modified Whole Life Insurance

There are a couple of alternatives that are worthy of your time and money. Here we highlighted the most interesting ones and made a simple comparison to understand the main differences between the possibilities.

Traditional vs. Modified Whole Life Insurance

When traditional life insurance is compared to the modified one, you will find out that they have some similarities and differences at the same time.


Traditional life insurance will cover you indefinitely – meaning for a specific period you purchase your insurance for. On the other hand, you are covered for your entire life with a modified whole life insurance policy.


With modified whole life insurance, the premiums are higher in the first place. Another thing is that they are modified, meaning that they will be lower in the early years of the policy and then rise after the waiting period.

On the other hand, with traditional life insurance, your premiums remain constant. That means

That you will be required to pay a fixed amount of premiums throughout the life of the policy

Cash Value

You will be able to build and access your cash value both with traditional and modified whole life insurance.

Whole Life Insurance vs. Modified Whole Life Insurance

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This is the most common question we get, and here is the answer.


The duration of the whole life insurance and modified whole life insurance policy is the same – they both cover you for your entire life.


Here you will find the main difference. With whole life insurance, you can expect the same level of premiums to be paid in all years. On the contrary — with modified whole life insurance – you will be required to pay a higher premium at some point in the future after paying a lower premium for the first few years.

Cash Value

Both policies allow you to build the cash value over the years, tax-free. However, many of the features used to create more rapid cash value in a whole life policy are generally not available on a modified whole life policy.

The costs of Modified Whole Life Insurance

Usually, everything sounds good to us until we learn the price of it. That’s when we start to determine whether something is worthy of our investment. These are the average modified whole life insurance quotes.

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Please bear in mind that:

  • It might be possible for you to get lower rates and coverage with no waiting period – something to ask your insurance agent about.
  • You aren’t limited to these amounts – you could have more or less coverage.
  • These prices are guaranteed acceptance, meaning that at minimum, it’s guaranteed that you could qualify for this coverage at these rates.
  • Premiums shown would never increase – the rate you pay when you start is what you’ll always pay.

When should you buy a Modified Whole Life Insurance policy?

So far, we probably answered all your questions, but one – When should you buy a Modified Whole Life Insurance policy? There are many reasons for you to make this choice, but we highlighted the most common situations people decide to buy a modified whole life insurance policy.

Cognitive Memory Disorders

People who suffer from cognitive memory disorders usually can not qualify for other insurance products, so modified whole life insurance would make a good fit.

Kidney Failure

This is considered one of the most severe health conditions, and people who unfortunately suffer from it are usually not approved for standard life insurance policies. If you are suffering from kidney failure, a modified whole life insurance policy could be a good fit, as you will get the benefits you are looking for, and you’ll be able to qualify for it.

Supplemental Oxygen Usage

Another condition under which you should be looking for a modified whole life insurance policy. Unfortunately, suppose you use an oxygen tank to supplement your breathing. In that case, most companies will not approve you for usual policies, leaving you with modified whole life insurance as your best option.

Terminally Ill

If you’re terminally ill, in a nursing home, or confined to your wheelchair, a modified plan would be the best fit for you.

Bear in mind that people often make a mistake thinking that they would not be eligible for traditional or whole life insurance policies if they are suffering from chronic illness – such as diabetes, or have cancer or heart health history. This is not true – if you can choose between a whole life insurance policy and a modified whole life insurance policy, always choose whole life insurance. We talked a lot about the benefits of whole life insurance and how – besides covering you throughout your lifetime – it can also help you build wealth.

Final thoughts

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In this article, we thoroughly covered everything you need to know about modified whole life insurance. We hope we helped you understand the concept better, and with better awareness, make a decision about your life insurance policy.

If you want to learn more about life insurance or manage your personal finances, you can register for a premium membership with Wealth Nation. We will teach you how to use your life insurance to become your own banker and build your wealth!

Good luck, and we hope we’ll see you in our membership group!