What is modified whole life insurance? It’s a variety of whole life insurance that covers you for your entire life, with premiums that start at a low introductory rate. Once that rate ends, your payments will increase and stay at that higher rate for the rest of the time you own the policy. If you’re low on cash now but want lifelong coverage, modified whole life is an option. We’ll look at how it works and some pros and cons below.Get a Free Quote Now
As the name suggests, it’s a form of whole life insurance. Unlike term policies, whole life covers you until the day you die. As long as you keep the policy in force by paying your premiums, it won’t expire. That means your loved ones are guaranteed to get that death benefit payout when you pass away.
And like other forms of permanent coverage, modified whole life also contains a cash value component. The insurer places a small portion of your payments into your cash value account. This grows over time at a set rate of interest. That growth is tax-deferred, meaning you’re not taxed as your cash value grows in your account. Later, once it’s had time to grow, you can use that cash value to pay your premiums or withdraw it to use however you want.Get a Free Quote Now
The change in premium payments is the defining feature of modified whole life. In most cases, the low payments last for a few years – carriers will offer anywhere from two to 10 years at this lower introductory rate. After that point, your payments go up and remain at that higher rate.
So…what is modified whole life insurance designed to do? Those lower initial payments help you afford more coverage than you could otherwise get with your current budget. The assumption here is that although the higher payments might be unaffordable right now, you’ll have more income and be better able to afford them in a few years. It’s a way to lock in additional coverage without having to wait.Get a Free Quote Now
What is modified whole life insurance going to do for you that another type of coverage can’t? Let’s take a look:
On the other hand, there are a few things to consider that might mean modified whole life isn’t the right type of coverage for you. Consider these points:
If you’re shopping for a policy, you have to ask yourself: what is modified whole life insurance going to get me that standard whole life or term life can’t?
If it boils down to affordability, consider a term life policy instead. The cost is much lower (hundreds per month), and with new longer term lengths of 35 and 40 years, you can protect your loved ones for longer. All for much less money!
If it’s non-expiring coverage you’re after, consider a standard whole life policy. You won’t get the lower introductory premium rate, but also won’t have to worry about a price hike in later years.Get a Free Quote Now
One possible solution is policy stacking. This means buying two policies – one whole life policy that will never expire, combined with a lower-cost term policy to boost the amount of death benefit your loved ones would get if you pass away within the term.
Because we specialize in life insurance, we can help create a customized solution that meets your needs. If you’re on a tight budget, we can find ways to get you the most coverage the least amount of cash. Or if you’re more concerned with maximizing your cash value and death benefit amount, we can help you do that, too.Get a Free Quote Now