Modified Life Insurance: Everything You Want to Know

Modified life insurance has premiums with an alternative structure compared to traditional life insurance policies. The premiums are cheaper than many policies, but they increase after the first few years of the policy. Once the premiums for a modified life insurance policy increase, they are often more expensive than other life insurance rates.

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UPDATED: Jun 28, 2022

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Written By: Chris TepedinoReviewed By: Laura WalkerUPDATED: Jun 28, 2022Fact Checked

The Rundown

  • Modified life insurance has premiums that have an alternative structure that gives the policyholders lower rates for the first few years of the policy before the premiums increase for the remainder of the policy
  • While modified life insurance may be more affordable than traditional life insurance in the beginning, eventually, the rates will be more expensive than other insurance options
  • Alternatives to modified life insurance include convertible term life insurance and an adjustable life insurance policy

While you’re looking for affordable life insurance, you may stumble upon modified life insurance. However, modified life insurance policies aren’t prevalent, and you may be wondering if it’s a good fit for you.

Modified life insurance has cheaper rates for the first few years of the policy, and then premiums increase for the rest of the policy. While the promise of temporary cheap rates can lure some people in, modified life insurance is typically not the best choice for most people. Read more below.

If you’re still interested in finding a modified life insurance company, enter your ZIP code into our free quote comparison tool above to get affordable modified life insurance quotes now.

What is modified life insurance?

A modified life insurance policy is one in which the premiums have an alternative structure compared to traditional life insurance policies. Modified life insurance policies typically are whole life insurance, but they may also include term life insurance policies. Modified policies may also be called graded life insurance.

With a modified life policy, premiums start lower and will increase between the third and fifth years of the policy. After this increase, the premiums will generally stay the same for the rest of the policy. The death benefit stays the same throughout the entire policy.

Suppose you have a modified whole life insurance policy. In that case, your life insurance company is unlikely to allow you to make contributions to your policy’s cash value until the premiums increase.

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How much does modified life insurance cost?

Let’s first take a look at the cost of traditional term life insurance:

Average Monthly 20-Year Term Life Insurance Rates by Age, Gender, and Coverage Limits
Age & GenderAverage Monthly Rates for $500,000 Death BenefitsAverage Monthly Rates for $750,000 Death BenefitsAverage Monthly Rates for $1,000,000 Death BenefitsAverage Monthly Rates for $2,000,000 Death Benefits
50-Year-Old Female$71.03$103.64$128.87$250.87
50-Year-Old Male$93.23$136.94$174.13$340.64
60-Year-Old Female$102.37$149.34$189.50$373.49
60-Year-Old Male$138.64$204.05$255.08$504.64
70-Year-Old Female$295.61$440.76$556.17$1,089.38
70-Year-Old Male$444.63$664.29$846.83$1,676.36
80-Year-Old Female$1,375.68$2,061.10$2,573.20$5,086.77
80-Year-Old Male$1,776.11$2,661.75$3,455.01$6,901.88
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Now, let’s look at the cost of traditional whole life insurance:

Whole Life Insurance Rates for a $100,000 Policy
SexAgeWhole Life Insurance Rates Per Month
Male65$359
Female65$305
Male75$643
Female75$572
Male85$1,478
Female85$1,259
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Modified life insurance rates generally start much lower than their traditional counterparts. For example, you will likely pay much less for a modified whole life insurance policy than you would for a traditional whole life insurance policy. However, once the rates increase, they are often much higher than a traditional policy.

What are the pros and cons of modified life insurance?

The advantages of modified life insurance include:

  • Premiums are affordable in the beginning. Most of the appeal in modified life policies comes from the lower premiums, which can be helpful for people who may not be able to afford life insurance but expect their income to increase.
  • The death benefit remains the same. Even if you’re in the beginning phase of your policy and paying lower premiums, your beneficiaries would still receive the full death benefit if you pass away.
  • Whole life insurance is permanent coverage. Your coverage doesn’t end after a certain period.

The disadvantages of modified life insurance include:

  • They are more expensive long-term. Once the rates increase, you will pay more than a traditional life insurance policy costs.
  • They can be complicated. Term life insurance is usually the simplest type of life insurance, but most modified policies are whole life insurance.
  • Your cash value may grow more slowly. If you have a modified whole life insurance policy, likely, you won’t be able to contribute to your policy’s cash value until after the rates increase.

While the lower rates at the beginning of the policy can pull many people in, the reality is that modified life insurance policies often aren’t worth the eventual increase in rates. Instead, most people can benefit from paying the slightly more expensive but level premiums for a different policy or waiting until they can afford a traditional policy.

What are the alternatives to modified life insurance?

Modified life insurance is becoming increasingly harder to find since the benefits of the policies often don’t outweigh the costs. In addition, convertible term life insurance policies are making modified policies obsolete.

You can convert your term policy to a permanent life insurance policy before your term ends with a convertible term life insurance policy. Therefore, you get to pay the lower costs of term life insurance until you decide you can afford to convert to permanent life insurance.

Another alternative to modified life insurance is an adjustable life insurance policy, which combines some term life insurance and permanent life insurance features. These policies offer flexible terms, death benefits, and premiums.

What happens to the premium for an adjustable life policy? Part of the premium for an adjustable policy goes toward the insurance cost, while the other part builds the policy’s cash value. You can adjust the premiums by putting more or less toward your cash value, and you can also use the cash value to pay your premiums if you can’t afford to.

If you want to buy modified life insurance or an alternative, enter your ZIP code into our free quote comparison tool below to find a modified life insurance company for you.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about insurance. Our goal is to be an objective, third-party resource for everything insurance related. We update our site regularly, and all content is reviewed by insurance experts.

Chris Tepedino is a feature writer that has written extensively about home, life, and car insurance for numerous websites. He has a college degree in communication from the University of Tennessee and has experience reporting, researching investigative pieces, and crafting detailed, data-driven features. His works have been featured on CB Blog Nation, Flow Words, Healing Law, WIBW Kansas, and C...

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Written by Chris Tepedino
Insurance Feature Writer Chris Tepedino

Laura Walker graduated college with a BS in Criminal Justice with a minor in Political Science. She married her husband and began working in the family insurance business in 2005. She became a licensed agent and wrote P&C business focusing on personal lines insurance for 10 years. Laura serviced existing business and wrote new business. She now uses her insurance background to help educate...

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Reviewed by Laura Walker
Former Licensed Agent Laura Walker

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