What Is Modified Whole Life Insurance?

Modified whole life insurance is an option that some insurance companies offer to people who want permanent life insurance coverage with a lower premium initially. Let’s go over what this type of policy is, the long-term effects, and another potential option to make the most of your money.

What Is Modified Whole Life Insurance?

Modified whole life insurance is a policy that offers an alternative premium payment structure. More specifically, the premium for a modified whole life policy is lower than average during the beginning portion of the policy term, and then after a certain number of years, the premium will increase to higher than the average for the rest of the policy. 


Most modified whole life insurance premiums will stay at a lower level for 5 to 10 years. Once the premiums increase, they should remain the same at a higher level. The death benefit stays the same regardless of the premium structure, which may be an enticing benefit. However, a modified whole life insurance policy will be more expensive than a non-modified policy over time so it’s important to do your research and make sure this is really the best option before signing up. 

Modified Term vs. Modified Whole Life Policies

Most term life insurance policies cover a set period of time, such as 10, 20, or 30 years, and then they expire. Modified term policies are similar and offer relatively low premiums, but should you outlive the preset term, your beneficiaries won’t receive any death benefit.

Whole life insurance covers you for your whole life and includes a cash value component, kind of like a savings account, that builds up over time. This means you can eventually borrow money from the insurance company using your cash value as collateral. 

Modified whole life insurance is the more common type of modified life insurance. It can build cash value, but usually not as fast as a non-modified whole life insurance policy that is designed for high cash value.

Pros and Cons of Modified Whole Life Insurance

On the surface, modified whole life insurance seems like an affordable option for people seeking permanent life insurance coverage with premiums that start out at a lower level. 

However, it is important to understand the advantages and disadvantages prior to signing a contract; in fact, a combination of traditional whole life insurance and convertible level-term life insurance (two separate policies) may serve your needs better than one modified whole life insurance policy. 

Advantages of Modified Whole Life Insurance

When considering a modified whole life insurance policy, you may see certain benefits, such as:

  • Lower premiums for the first 5 – 10 Years
  • The face value of the policy (aka death benefit) does not change when the prescribed premium structure is followed
  • Permanent coverage with less money in the beginning

Disadvantages of Modified Whole Life Insurance

Before committing to a modified policy, you should fully understand the drawbacks you’re signing up for.

  • Modified policies are more complex than traditional insurance with lower guarantees
  • Waiting period – there may be a clause where the death benefit would not be paid out for non-accidental related deaths during early years of the lower premium period
  • Less cash value accumulation over time
  • More expensive long-term (premiums are higher than term insurance initially since the policy does provide permanent  coverage) 

A combination of non-modified whole life and convertible term life insurance can provide similar benefits to a modified whole life insurance policy while avoiding some of these disadvantages.

The Advantages of Combining Whole Life Insurance and Term Life Insurance

If you want to take advantage of the short-term savings of a term policy but want the long-term advantages of a permanent policy—with lower premiums initially —you have another option. You can combine convertible term life and whole life insurance (both non-modified types). Because this combination makes so much sense financially, most modified whole life insurance policies are becoming extinct. 

Combining the two types of insurance allows for permanent coverage, larger death benefits, more flexibility, and often lower cost. 

You also get to choose the right combination of term and whole life, which can be very helpful. For example: If your family is currently working on paying off a large debt, like a mortgage, then including more term life insurance initially with some whole life insurance can ensure that you’ll have a higher death benefit while the mortgage balance is larger than it will be 10-20 years later. 

Is Modified Life Insurance Right for You?

Initially, paying less for a policy that covers you for the rest of your life may seem appealing. However, you will be paying a higher premium overall for the rest of your life without some of the benefits of whole life insurance, or the benefits of a combination of convertible term and whole life insurance together.

When you want to get the biggest bang for your buck over a long period of time, it usually makes sense to start with a combination of convertible term and traditional (non-modified) whole life insurance that is designed to build high cash value.

The Bottom Line

Everyone needs and deserves life insurance coverage that provides peace of mind now and a financial legacy for the loved ones we leave behind. McFie Insurancewants you to have the right policy (or combination of policies) that will serve you, not just for a few years, but for the rest of your life. With the right strategy, you can get some of the benefits of both term and high-cash whole life insurance,  and see your money grow.

Our team is ready to hear about your needs and simplify the insurance process so that you can make a confident decision. Schedule a strategy session to learn more about the alternative options to modify whole life insurance.

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