Rejoice in the knowledge that a modified health plan is available, regardless of your current health.
As with all things in life, there are pros and pitfalls.
Insurance companies can cover every health concern. They have to pick where they are willing to compete for particular conditions.
The following are some common issues that you may be able to qualify for a non-modified whole-life policy.
Modified Insurance for life is defined by the fact that premiums can change over time. This usually happens between five and ten years after the Policy starts.
If you have diabetes, your pocketbook and family won't appreciate XYZ company because they'll deny you or, at minimum, charge you much more than ABC company.
The price of your Policy can't go up over time. You can't reduce your coverage. Your Policy will never expire.
Compare these costs with term life insurance. The same 35-year-old male would pay $30.44 monthly for a $500,000 20-year policy.
After premiums increase, they typically stay consistent for the rest of the Policy. Premium amounts typically rise only once.
This is undoubtedly true for modified whole life insurance.
The two significant differences between traditional whole life insurance and modified whole life insurance are:
Modified whole life insurance allows for lower premiums (usually for two to three years, but there are times when it can be up to five to 10 years). After that, the rate will increase for the rest of the Policy. The initial savings might be appealing, but it is not the best type of life insurance policy due to the high premiums and complex policy options.
Securing higher premiums over the next few years, regardless of whether or not you have the means to pay them
A version of a whole life insurance policy where the insured pays less premium than usual for an agreed-upon amount of time. After that period, the premium payments increase to an agreed-upon amount that is higher than usual for the life of the Policy.
Last but not least, some companies might refer to modified whole lives plans as "final expense life insurance", "funeral Insurance", or "burial coverage".
These terms are simply marketing terms. They refer to a whole life insurance plan with limited underwriting so that people with medical conditions can still get coverage.
Like all things, there are pros and cons to everything.
Your Policy may be cancelled if premiums don't go up. Also, you could be subject to high surrender costs. Even more important, your family could lose their financial protection.
CEO, The Annuity Expert. A Modified Endowment Contract, or MEC, is a life insurance policy modified from the traditional whole life insurance policy. A MEC offers tax-deferred growth and allows you to take out loans against the policy's cash value without penalty.
Modified whole life insurance offers lower premiums for a short time (usually two to three years but occasionally up to five or 10), followed by a higher rate for the remainder of the policy.
Is modified whole life insurance interest-sensitive? No, a modified whole life policy does not interest sensitive. It will build up a cash value that grows every time you make payment.