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Life Insurance

What is Modified Whole Life Insurance?

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Whole life insurance is insurance that protects you for a lifetime, but it can be quite costly, that’s why insurers developed modified whole life insurance. Whole life insurance has set premiums that last throughout your life. It also pays a premium to the beneficiaries based on the payments you’ve made throughout your life. This premium can be quite substantial after several decades of payments, and some whole life policies pay a dividend every year, too. The problem with whole life policies is that they’re extremely expensive, much more so than traditional term life insurance policies.

Modified Whole Life Insurance

A less costly alternative is modified whole life insurance, which can make a whole life policy more affordable. Modified policies start out at a specified premium for the first five years, and then the premium rises to another specified amount for the remainder of the policy. Just like whole life insurance, modified policies cover the insured for life, and they offer interest on the payments made. Many offer dividends every year, too.

Cash accumulated can sometimes be borrowed in certain situations, and the cash accumulated is tax deferred for your beneficiaries. Modified policies are never revoked or devalued, unless, of course, you stop paying the premium. Modified policies are good for business owners who want to protect their business interests, or homeowners who want to protect their mortgage for their beneficiaries. They can protect their beneficiaries from high estate taxes, as the policy can help pay those estate taxes.

Modified Vs. Term Life Insurance

Term life insurance is traditionally cheaper than whole life insurance, which is one reason it’s more popular that whole or modified life insurance. However, term life doesn’t pay you dividends or interest, and when it expires, you lose all the money you’ve paid into the policy. Modified life insurance is extremely versatile, too. You can add several different options, including covering your children and your spouse, accidental death insurance, and many other riders that protect you and your family throughout the life of the policy.

Investigate modified whole life insurance if you want the best whole life insurance protection, but are concerned about the initial costs. Modified polices are more affordable for the first five years, so they make sense for start-up businesses, too.

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