Cash Value: With whole life insurance, your premiums will immediately fund your cash account. But, for most modified policies, you will have to wait until your premiums rise.
Modified whole Insurance provides lower premiums for a limited time (usually 2 to 3 years, but occasionally up 5 or 10). Then the Policy will continue at a higher rate. Although it may offer some savings, the complexity of the policy options and high premiums make it not the best option for life insurance.
You still pay more for your coverage than for term life insurance
The lower rates you receive early in your modified whole-life coverage are not a reduction. After the initial period, higher payments will make up for the difference.
So rejoice in knowing that a modified plan is an option no matter how bad your health is.
Even though the differences may seem insignificant, they can immediately impact your finances. Although you won't lose much cash value over the two years, a more extended introductory period can cause you to fall behind. This will leave you without any critical policy features and cost five to fifteen times as much to obtain similar coverage under a term-life policy.
Are you curious about modified whole-life Insurance?
This is a version of whole-life insurance where the insured pays less than usual for a set amount of time. The premium payments will increase to an agreed-upon amount for the Policy's life.
A whole life insurance policy is very straightforward. Here's the fine print you need to know:
Life insurance is not for everyone.
While the differences may seem small, they can have a tangible impact on your finances. You may not lose out on much cash value growth over two years, but a more extended introductory period can set you back. And you'll be going without a critical policy feature while paying five to 15 times more than it costs to get similar Coverage under a term life policy.
Premiums: Standard whole life insurance has the same premiums for your entire Policy, whereas modified whole life premiums change once.
Prices cannot increase over time. There is no way to decrease coverage; the Policy cannot be cancelled at any time.
Below are a few common health issues you could likely qualify for a non-modified whole-life policy.
Some companies offer as low as 10% and others as high as 30%. Most companies, however, grant 10% interest for your premiums.
No insurance company can cater to every single health issue. They have to choose where they compete for specific health conditions.
It is important to remember that any policy purchased from a company without health questions will have a 2 to a 3-year waiting period.
Coach B. data indicates that a 35-year-old male without complex health issues would be able to pay $517 per month for a $500,000 Whole Life Insurance Policy. You may pay less for the first few years, but for many decades, you'll be paying more.
You should seriously consider a modified whole-life policy. Review your financial plan and talk to a financial advisor to make sure it's the right decision for you and your family.
Some companies offer a two-year waiting period for modified premium whole lives, while others require you to wait three years.
If you are seriously considering a modified whole life policy, carefully review your budget and consult with a financial advisor to ensure it's the best choice for you and your family.
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.