What Is Modified Whole Life Coverage?

Learn about modified whole life insurance and how it can help cover you.
By Mike Parker
Updated Sep 4, 2022
A person signing up for Modified Whole Life coverage with their insurance agent.
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The most common type of life insurance policy is a whole life policy; however, many cannot afford to pay the initial premiums.

An option that can ease people into paying premiums is a modified whole life insurance policy, but one must be aware of the finer details.

In this article, we will help you understand what a modified whole life insurance policy is, how it works, and how it compares to other insurance options.

What Is Whole Life Insurance?

A whole life insurance policy is a type of permanent life insurance that stays in place for a policyholder’s entire life. Whole life policies pay out a death benefit when the insured person dies. 

Whole life insurance policies don’t typically expire as long as the premium is covered. 

However, when you buy this plan, you can’t increase the life insurance proceeds (death benefit) in the future.

Whole life plans also have a cash value account or component, which policyholders can add on top of premiums.

What Is a Cash Value Component?

Cash value: A cash value component is a type of savings account that policyholders with permanent life insurance can use to build up additional wealth through their policy. People can use this money as collateral for loans, as an emergency fund, or invest it.

A couple signing up for Whole Life Insurance with an insurance agent.

Source: Pexels

How Does Life Insurance Work?

Life insurance is a type of long-term coverage that insures a person’s life. Life insurance policies are contracts between policyholders and insurance companies.

A policyholder (the person covered by the life insurance policy) pays a monthly or annual premium to the life insurance company (the business offering coverage).

In exchange, the life insurance company promises to pay out a death benefit to the insured person’s beneficiaries when they die.

What Is Modified Whole Life Insurance?

The same as a whole life insurance policy, a modified whole life policy provides lifetime coverage for a premium that increases over time.

Typically, these cheaper initial premiums increase after five or 10-year intervals. The premiums will not continually increase with time but rather, after the increase, remain constant throughout the life of the policy. 

In comparison, a normal whole life policy has a fixed premium rate throughout. For example, a modified life insurance plan might start out with a premium of $150 per month for the first five years. The premium will then increase to $200 for the following five years, and then increase to $275 after ten years.

Meaning: If you cannot afford the premiums that a traditional whole life insurance policy currently offers, then taking out a modified policy will provide you with the same coverage as a standard whole life policy.

Modified Term Life Insurance

Term life policies work similarly to other types of life insurance and are contracts between policyholders and insurance companies that financially cover people in the event of their death.

Policyholders pay the insurance company a monthly premium and when the policyholder dies, the insurance company pays out a death benefit.

The difference is that term life insurance plans only offer coverage for a fixed period — such as 10, 20 or 30 years. 

Modified term life works the same as regular term life, but has cheaper initial premiums before they increase to a fixed amount.

Terms You Should Know:

Death benefit: The amount of money that will be paid out to a policyholder’s beneficiaries when they die.

Premium: A regular payment made to an insurance company in exchange for insurance coverage.

Policyholder: The person who is insured by a life insurance contract.

Beneficiary: A nominated person who will receive the full or a portion of a life insurance contract’s death benefit.

A couple who are smiling because they have Whole Life Insurance.

Source: Pexels

What Is the Difference Between Standard and Modified Whole Life Insurance?

Whole life insurance and modified whole life insurance policies are quite similar, with premiums seeming to be the major difference.

However, there is another difference between the two: cash value.

Cash Value for Modified Whole Life Policies

With a standard whole life insurance plan, as you pay your monthly premiums, you start funding your cash value amount.

With a modified whole life policy, however, you can only begin building your cash value once your premiums have increased.

Although the difference may seem small, not contributing to your cash value from the start could have a significant financial impact.

At the beginning of your modified policy you may not lose out on much cash value growth, but if your premiums only increase after 10 years, you will miss out on 10 years to build up cash value.

Committing to a modified whole life policy will mean going without a key policy feature while also paying more for your premiums.

A couple who are reviewing their cash value for their Modified Whole Life Insurance policy.

Source: Pexels

Pros and Cons of a Modified Whole Life Insurance Policy

The initial cheaper premiums offered by a modified whole life policy may seem like an inviting, affordable way to ensure coverage.

However, before committing to this type of policy it is important to understand exactly what it is you’re signing up for. Take a look at the pros and cons:


  • Lower Premiums at the Beginning

If you cannot currently afford a standard permanent life insurance policy, then modified whole life insurance could be a good option for you.

Because the premium payments are lower than other policy premiums in the beginning, the modified option may be a viable alternative if you cannot currently afford better coverage.

  • The Death Benefit or Face Value Does Not Change

Although premiums are initially low and increase over time, the face value of modified whole life insurance remains the same throughout the life of the policy.

Meaning, the death benefit that the beneficiary receives if the policyholder dies will never change, no matter how low or high your premiums are.

  • Permanent Coverage

Because modified whole life insurance is a form of permanent life insurance, the policyholder is guaranteed a death benefit, as long as the premiums are paid.


  • Less Cash Value Build Up

With payments lower in the first few years compared to regular life insurance, the cash value aspect of modified life insurance builds up slower than regular whole life insurance.

  • More Expensive Long-Term

Despite the initial cheaper premiums, modified whole life insurance is typically more expensive in the long run.

It is also generally more expensive than term life insurance, despite the initial low premiums.

A young couple viewing what the pros and cons of a Modified Whole Life Insurance Policy are.

Source: Pexels

How Much Does a Modified Whole Life Insurance Policy Cost?

The initial rates that you are charged for your modified whole life policy are not to be seen as discounts on the overall coverage. 

The difference compared to a standard whole life policy will be made up for when the premiums increase.

For example, if a male in his mid-30s takes out a $500,000 whole life insurance policy without any chronic diseases, he will pay roughly $500 per month in premiums.

If the same man were to take out a modified whole life insurance policy for the same amount of coverage, he would initially pay less than $500 for the first few years.

However, after five to 10 years, he would have to pay more than $500 to make up for the standard whole life premiums.

These increased premiums may have to be paid for decades after the initial policy premiums.

Where to Find Out More about Life Insurance

For some people, modified life insurance is a good option to get coverage straightaway. However, it’s important to know that your premiums will increase over time and that you will eventually pay more each month for cover.

If you’re still unsure about what life insurance is right for you, get in touch with one of our professional consultants for personal and detailed advice. Send us an email at help@policyscout.com or give us a call at 1-888-912-2132.

For more information, insurance quotes, and to get the process started, visit PolicyScout today.