New messages from Aflac | View Notifications opens a dialog Close X dismisses the notification alert

What is Modified Whole Life Insurance? 

Whole life insurance can help protect your loved ones for your entire life and help offer you a steady wealth-building vehicle through the cash value growth component. These policies tend to charge higher premiums. However, a modified whole life insurance policy can help make this coverage more accessible by offering low rates for the first few years. This article will discuss modified whole life insurance policies and compare them against traditional policies to help you determine the right policy type for you.

What is a modified whole life insurance policy?

Modified whole life insurance is a whole life policy that starts with low premiums for an introductory period, typically lasting two to three years.1 However, it can be longer, depending on the insurer. Premiums increase at the end of the introductory period. These policies come with lifelong coverage and a cash value growth component, just like traditional whole life insurance. 

Traditional whole life insurance vs. modified life insurance

Here are some key differences between traditional whole life and modified life insurance:1


Modified life insurance premiums start low and then increase. Although this can make this policy more accessible to many policyholders, you must also plan for higher rates after the introductory period. On the other hand, traditional whole life insurance has fixed premiums throughout the policy term.

Cash value

Traditional and modified whole life insurance policies build cash value with each premium payment. However, modified life insurance cash value may grow slower initially due to the lower premium payments during the introductory period. Meanwhile, traditional whole life insurance may offer a head start since premiums don’t start small. This causes more money to go into the cash value early, magnifying the effect of compound interest.

Peace of mind doesn't
have to break the bank

Don’t wait until it’s too late. Help cover yourself and your family with coverage from Aflac.

Get a Quote

Pros and cons of modified whole life insurance 

Modified whole life insurance comes with several benefits and drawbacks to consider:

Pro: Lifelong coverage 

Modified whole life insurance coverage lasts for life while you keep up on premiums. This helps ensure your loved ones are protected no matter what happens, giving you added peace of mind and negating the need to renew or purchase more coverage.

Pro: Low initial premiums

The low premiums during the introductory period make permanent life insurance coverage more accessible for many. It may be easier to obtain the policy and save for other expenses during the first few years.

Pro: Cash value and dividends

Modified whole life insurance accumulates cash value that you can eventually tap into via withdrawals and policy loans. Some modified whole life insurance policies also earn annual dividends, depending on the insurer’s financial performance that year. These dividends are generally not taxable if they are less than the premiums paid. You can use these dividends in several ways:

  • Get cash: Receive a check or ACH payment.
  • Buy more coverage: Purchase additional paid-up insurance to boost your death benefit.
  • Pay premiums: Reduce or cover premium payments without sacrificing coverage.
  • Earn interest: Save the funds in an insurer-provided, interest-bearing account to earn on unused dividends. You can access your dividends when needed. Keep in mind that interest earned may be taxable.
  • Repay policy loans: Pay down outstanding policy loans to reduce interest costs and keep your policy in good standing.

Con: Higher premiums over time

Modified life insurance premiums increase as soon as the introductory period ends. This can make this policy challenging to manage if you don’t plan for the cost increase, such as by reducing your expenses or increasing your income.

Con: Higher cost in the long run

In many cases, premiums rise higher than traditional whole life insurance premiums once the introductory period ends.1 This can result in higher policy costs in the long term, especially if you have a long life expectancy. The policy may be less cost effective.

Con: Limited flexibility 

Modified whole life insurance premiums offer less flexibility than other life insurance types. For instance, once premiums increase, you can’t change them to fit your budget. In contrast, some permanent policies, like universal life insurance, may let you adjust the premiums and death benefit as needed.

Is modified whole life insurance right for me?

Here are some types of policyholders who may benefit from modified whole life insurance:

  • Those who expect a significant income increase: Rising income can help you meet the increased premiums after the introductory period. If you expect a big raise or promotion, or you’re a business owner who expects significant growth, modified life insurance could fit your budget and coverage needs.
  • Those who need immediate coverage: Modified life insurance gives you easier access to lifelong coverage. This can suit people who need coverage now and are unable to wait until it fits their budget.
  • Those paying down debts: Significant debt can make it hard to afford a traditional whole life insurance policy. A modified whole life insurance policy is easier to manage alongside debt payments. Prospective policyholders anticipating significant debt reduction in a few years could benefit from a modified whole life insurance policy.
  • Those with temporarily high expenses: People with high expenses for a short period, such as young families, may need coverage without the budget for traditional permanent policies. Modified whole life insurance is easier to fit their budget as their child grows and some initial expenses decrease.

Modified whole life insurance may not be the best option for some situations. Consider alternative life insurance policies in the following circumstances:

  • You want predictable payments: Whole life insurance and term life insurance each offer fixed premiums. The latter does not have cash value and can expire, but premiums are also lower.
  • You want low premiums for the duration of your policy: Term and final expense insurance each offer lower premiums. The latter offers less coverage as well, but has cash value and helps cover funeral costs, medical bills, and other end-of-life expenses.
  • You want the potential to build wealth faster: Traditional whole life insurance policies build cash value faster since payments start larger. This also helps you compound interest faster. Other policies, like variable life insurance, offer more potential rewards for more risk by letting you invest the cash value in stocks, bonds, and other securities.
  • You want flexibility: Universal and variable universal life insurance offer adjustable premiums and death benefits. Each may also let you pay premiums with cash value, offering additional flexibility with the wealth you build.

Get a quote for whole life insurance

Modified life insurance provides an accessible path into whole life insurance ownership, offering low premiums for the first few years. However, policyholders must prepare for premiums to increase and be willing to forego some potential cash value growth.

Aflac has you covered if you’re looking for extensive coverage with reasonable premiums. We offer accessible life insurance policies that may fit most budgets, from term life to whole life insurance. Chat with an agent today to explore your options and get a quote. 

Still have questions?

Explore your life insurance options.

Get a Quote