Modified Whole Life Insurance Defined

A modified whole life insurance policy is a simplified issue whole life insurance policy designed for end of life expenses such as burial or funeral expenses. It is permanent life insurance with a waiting period for applicants with severe health conditions that cannot qualify for burial insurance with no waiting period.

We are going to cover how modified whole life insurance works, what it is and if it is best for you.

What is a Modified Whole Life Policy?

A modified whole life insurance policy is either a simplified issue whole life insurance or a guaranteed issue whole life insurance policy. Both are whole life insurance with very little underwriting or no underwriting at all.

  • Guaranteed Issue Whole life insurance – No health questions or medical underwriting
  • Simplified Issue Whole Life Insurance – Health questions, history and prescription checks but no medical exams

Keep in mind that the only difference between modified whole life insurance and traditional whole life policies are the waiting periods.

This life insurance coverage is referred to as final expense insurance(burial insurance, funeral insurance etc.). It is meant for sick individuals to cover the costs of their funeral and other end of life expenses.

How Does Modified Whole Life Insurance Work?

The way this policy works are as follows:

  • Coverage amounts between $2,000 – $40,000 (depending on company)
  • Waiting Periods between 1 – 3 years
  • If insured dies within the 1 – 3 year waiting period the beneficiary receives the premiums paid plus 10% interest.
  • Full death benefit payout during the waiting period if insured dies from accident
  • Premiums Never Increase
  • Death Benefit amount of the Policy Never Decreases
  • Payout to the beneficiary is 100% Tax Free
  • It is a permanent life insurance policy
  • Builds Cash Value

Modified Premium is Not the Same as a Modified Whole Life Policy

A modified premium whole life policy is not the same as a modified whole life insurance policy. Now “modified premium” stands for premium payments that modify themselves over time.

This means the policy premium would start cheap and then the premium payment would increase after 2 – 10 years.

The good news is this type of life insurance policy has been discontinued. It did not make sense to have a life insurance policy like that if the premium would just increase suddenly.

Graded Benefit Means the Same Thing as Modified with Different Companies

Now modified and graded death benefit mean the same thing between different companies. For example Prosperity life refers to their waiting period life insurance coverage as “modified” where as Mutual of Omaha refers to their whole life insurance as “graded” death benefits.

Both terms are different but they both mean the same thing. There is a waiting period involved with the life insurance policy. That means whatever term you hear when working with a different life insurance company it will have a waiting period.

Modified Life Insurance & Pre-existing Conditions

This type of policy should be a last resort when it comes to burial insurance. You should only apply for this whole life insurance if you have severe health issues.

Most simplified issue whole life insurance policies can payout the full death benefit to you even with moderate health issues. This is why you should work with a life insurance agent from our agency. We help most seniors buy life insurance with pre-existing conditions and avoid a modified whole life plan.

That being said there are conditions that leave you with a modified life policy as your only option for funeral insurance. If you have been diagnosed with AIDS, Alzheimer’s, are on oxygen tanks, current cancer, organ transplant, getting assistance with daily living activities or confined to a nursing home you need a modified life policy.

Those are the conditions that will disqualify you from traditional life insurance policies and traditional whole life policies.

Higher Premiums for Higher Risk

Now since you are a higher risk applicant if you only qualify for a modified life policy. The life insurance premiums are going to be higher for whole life insurance policies like this.

The reason for this is because a life insurance company transfers your risk on to themselves when they insure you. You are essentially betting you are going to die and the insurance company is betting that you will live.

That means the life insurance premiums are going to be more expensive. In addition to this that is also why the insurance company will have those waiting periods in their life policies.

It is meant to protect them if you have a severe sickness which means you could die suddenly. That is why they withhold the full death benefit for 1 – 3 years depending on the policy.

Lower Premiums for Lower Risk

Now in contrast the healthier you are the more affordable it will be. In addition to this if you are healthy you should apply for a regular simplified issue whole life insurance coverage.

With funeral insurance with no waiting period you will pay lower premiums and be able to receive immediate death benefits.

How To Avoid a Modified Whole Life Insurance If Possible

As we mentioned a modified life policy should be your last resort. If you cannot get approved for any other traditional whole life insurance apply for this plan. Now that being said life insurance companies have underwriting niches that we are trained in.

This means that your health conditions could be acceptable to certain funeral insurance companies that we represent. That is why you need to work with a licensed agency to buy life insurance

We can help you avoid paying higher premiums and avoid a waiting period depending on your health. Our agency has helped seniors with COPD and Congestive Heart Failure get approved for whole life coverage.

Apply with us and we will field underwrite your health conditions to see if we can fit you into a traditional whole life insurance plan. If not we will tell you so and find you the best modified whole life coverage available

Frequently Asked Questions

Does modified whole life insurance have cash value?

Yes, modified whole life insurance has cash value. The cash value builds over time as premiums are paid into the policy.