Modified premium whole life insurance is very similar to basic traditional whole life insurance. The difference between the two products lies in the premium structure of the contracts. In a traditional whole life insurance policy, premium payments are flat throughout the life of a policy. With a modified premium whole life insurance contract, the amount of premium due is lower in the first years of the policy.

This period of lower premiums usually lasts through the first five to ten years of a policy’s life, depending upon the issuing company. After the period of lower premiums expires, the cost of the policy is typically a bit higher than a traditional level whole life policy for the remainder of the insured’s life. Premium amounts typically only rise one time (this is clearly spelled out in the illustration and policy data page). Here are the key points to remember about modified premium life:

  • The face amount and death benefit are the level over time and do not change.
  • The premium is lower in the early years and rises in later years.
  • Otherwise, the policy is the same as regular whole life insurance.

A modified premium life insurance policy is mutually beneficial to both the owner and the life insurance company. The policy is beneficial to the owner because premium payments are lower in the beginning policy years. Modified premium contracts make sense for life insurance companies because the insured person has the lowest risk of dying during the first years of the policy. When the risk of the insured person dying increases, premium payments become higher. A modified premium whole life insurance policy will also typically lead to more money in total being paid to the life insurance company over the course of the policy.

It can be debated whether when adjusted for the time value of money (comparing the net present value of the two policy types) the insurance company makes more with a traditional level premium whole life policy or a modified premium policy, but generally, the policies are priced to be about an equal return to the life insurance company.

Face Value Does Not Change

Even though premium payments are lower during the first years of the contract, the face value of the contract remains the same throughout the life of a policy.  If the same two face values are compared, the modified premium product will have lower premium payments than a level product during the first years, and slightly higher payments after the rise in cost. This is a critical component of this policy type.

Cash Value

Modified premium whole life policies have a cash surrender value just like the basic whole life insurance policies do.  Because payments are lower during the first years, the cash value will also accrue at a slower rate at first, compared to a level premium whole life product.


Modified premium whole life products are eligible for dividends just like traditional level premium whole life insurance. Dividend payments are generally lower in the first years because of the smaller cash value, compared to regular whole life. The dividends can be used for the same purposes as traditional whole life insurance, to pay premiums, purchase paid-up insurance, or as income.

Who Is A Modified Premium Product Useful For?

The modified premium whole life products are useful for people who do not have a lot of expendable income for a whole life insurance product now but will have more in the future. The type of person who needs this type of protection also needs a permanent life insurance policy. Examples of people who may be candidates for a modified premium policy include someone with a growing career who will make more money over time, someone whose kids will no longer need support in the future so the owner has more free cash to invest, or a family that only has one income earning member but will have another in the foreseeable future.

Modified premium whole life insurance may also make sense for business purposes such as key man or buy-sell insurance. This is especially true when a business is young and may not have the operating budget that it will have after a few more years of operations.

Important of Guaranteeing Insurability

Another reason modified premium whole life is useful for those on a budget is that obtaining insurance coverage when a person is young is very important. This is when people are healthiest, and by applying for insurance when healthy they both guarantee that they are insurable in the future, and that premium costs will be as low as possible over time because a younger person will most likely achieve a superior health rating from underwriting. A modified premium product gives an affordable way for people to accomplish these goals and still provide the same level of protection for their beneficiaries.

What Is Modified Premium Whole Life Insurance Used For?

Modified premium products have the same uses as traditional whole life insurance.  This includes estate planning, providing for living expenses as beneficiaries, funding retirement, funding an education, or protecting the ability to pay off a mortgage after death. For a comprehensive list of uses for this product, New York Life provides an excellent list here.

How To Buy A Modified Premium Whole Life Policy

Just like with other forms of insurance, comparing rates from different companies by requesting quotes is essential. While you will ultimately need to purchase the whole life policy from an agent, Life Ant provides an excellent resource for you to compare quotes. Simply enter your zip code in our comparison tool, and with some basic information, you will be given quotes and allowed to view individual providers.

After choosing a company you will need to work with an agent to get an application turned in, work through underwriting, and get a policy delivered to you. For information about the amount of life insurance you may need, don’t forget to view our insurance needs calculator.

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