Should I Buy Modified Whole Life Insurance in 2023?

Insurance companies offer everything: modified whole life insurance, traditional 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.

There is a reason people choose a modified whole life insurance policy amongst all other types of life insurance. Is the modified whole life worth it in 2023?

Let’s check it out.

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    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 lower premiums for the first few policy years. The premiums increase after an introductory period.

    Graded life insurance has modified premiums initially. This goes for a specific number of years at the beginning of the insurance policy.

    The waiting period usually lasts the first two to 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.

    chart showing a modified whole life benefit
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    Pros and Cons of Modified Whole Life Insurance

    Not a single insurance is a one-size-fits-all, and the modified whole life is not an exception. Let’s check some pros and cons of a modified whole-life policy.

    Pros of Modified Life Policy

    • A lot of people can qualify – With minimal underwriting required, almost everyone can apply and get this type of insurance. Even people with serious health issues can get whole-life coverage and receive a good death benefit with the cash value component attached.
    • Minimized payments in early years – Lower premiums in the early years of the modified deal are attractive while retaining the full face value. If you are confident that you will afford higher premiums later, the modified premium life insurance is the way to go.
    • Guaranteed coverage and premium amounts – Unlike the term life insurance policy, premiums for the permanent life insurance are locked in. Furthermore, the modified life policy lasts your entire lifetime.
    • Build tax-deferred cash value – life policies with cash value are more attractive, and modified life insurance is one of them. An accumulated cash value is significant when you want to surrender your policy, withdraw, or take a loan.
    • Flexibility – While considering the ideal life insurance plan, some people value flexibility, and the modified premium policy provides just that.

    Cons of Modified Whole Life Policy

    • Premiums increase – the modified life insurance is characterized by higher premiums after the first few years, which might negate all the benefits this life insurance offers. The fact that premium increases already means this policy isn’t suitable for everyone.
    • Takes time to build cash value component – A term life insurance policy isn’t the best to build cash value, nor is modified life insurance. Consider other traditional whole-life policies if you want to accumulate cash and invest.
    • Death benefit – In case of death of natural causes, the beneficiaries will not receive the full death benefit. Instead, they will get paid-in premiums and interest that depend on the insurance company. If the death benefits are the primary reason for your policy, we suggest other options.
    • Complexity – Because of its flexibility, modified life insurance is complex to understand and follow through, and the benefits you receive can be found in other straightforward policies.

    Whole Life Insurance vs. Modified Whole Life Insurance

    whole life vs modified whole life insurance comparison
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    Although similar in name, the two whole-life policies have pretty significant differences. Depending on what your goal with the policy is, you should choose carefully.

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

    The main difference is in premiums. With whole life insurance, you can expect the same premiums to be paid in all years, allowing you to use the money, take loans, invest it outside your policy and build cash value.

    On the contrary — with a graded life policy – 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, and these types of policies aren’t the best, especially if you consider to be your own bank at some point.

    Having said that, the cash value benefit is much better with a traditional whole-life policy.

    Modified Term Life Insurance vs. Modified Whole Life Insurance

    These two policies are similar in structure. Both offer lower premiums in the first few years and higher premiums after the introductory period.

    The modified term life insurance functions like traditional life insurance of this type – you pay for it for a fixed period, meaning the life policy can expire after 10, 20 or 30 years. In contrast, you are covered for life with the modified whole life.

    As its name suggests, the term coverage ends after some time, there’s no cash value while the death benefits are lower. Full-life coverage is always better if you can pay higher premiums.

    The Price of Modified Whole Life Insurance

    Usually, everything sounds good to us until we learn the price of it. That’s when we 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.

    Should I Buy a Modified Life Insurance Policy in 2023?

    So far, we’ve answered your question, and you already know what to do. You can determine how much life insurance coverage you need and decide based on that.

    But let’s see if the modified policy is the best for you in 2023 or if there are other better options.

    Modified policies are usually marketed to younger people who want to make the most out of permanent life insurance but cannot afford high premiums at the very start. 

    The insurance offers an alternative premium structure, and if you are certain you will be able to cover the costs after a few years, absolutely go for it.

    In addition, this policy allows people with one of the following diseases to get insurance:

    Cognitive Memory Disorders

    People who suffer from cognitive memory disorders usually can not qualify for other insurance products, which makes the modified package a blessing.

    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. With the modified insurance, 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. If you use an oxygen tank to supplement your breathing, 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.

    Modified Life Insurance Coverage Only Works for Some People

    Bear in mind that people often make a mistake in thinking they would not be eligible for traditional or whole-life insurance policies if they suffer from chronic illness – such as diabetes, or have a cancer or heart health history.

    Modified policies provide opportunities for people with various health conditions and are invaluable. Without such low-threshold policies, they wouldn’t be able to get any coverage.

    However, this type of policy works only for some people. If you can choose between a whole life 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.

    Whole Life Insurance Opens Its Doors to Family Banking

    Great as it is, the modified insurance is limited in its use and cannot be compared to the whole-life policy in almost any segment other than availability. Whole life opens the door to Infinite Banking and allows you to have the money work for you. 

    For those looking to use your life insurance for more than just a death benefit, whole life allows you to do just that. You can borrow money against your balance and invest, thus becoming your own banker!

    The infinite banking concept isn’t new, but to apply it in real life, you need some knowledge and the help of like-minded individuals! With it, we paid off our $140,000 debt and helped our clients earn $75 million in total!