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What is a modified death benefit?

So if you have some health issues and are looking to get the best price on a modified death benefit, you must, at all costs, work with a broker (aka independent agency) like Coach B., who can shop dozens of life insurance companies for you. They will match you with whichever one views your health most favorably. So, before you start looking into a guaranteed issue or modified policy, it’s best to give them a call to discuss your situation. That’s where you’ll get the best coverage for the least amount of money.


modified death benefit

Modified death benefit graded premium whole life

modified whole life vs graded premiumGraded premium whole life insurance is a whole life insurance policy where the full death benefit is not available to beneficiaries in the first couple of years but will become fully available after a certain period.

Typically, with a graded benefit whole life insurance policy, all premiums paid into the policy plus the interest they earn are paid out as a death benefit in the first two or three years. Once the life insurance policy has been in force for those years, the entire face value is available to pay out as the death benefit.

What is modified benefit whole life insurance?

what is modified benefit whole life insuranceModified death benefit whole life insurance is a policy that comes with a waiting period during the first 2-3 years. The insurance company will refund all your premium payments plus a set interest for any non-accidental death during the waiting period.

Once the waiting period is over, the full benefit is payable for any reason.

This whole life insurance policy is very straightforward. Here’s the fine print you want to know about:

  • Prices can’t increase over time
  • Coverage won’t ever decrease
  • Policy can’t expire at any age
  • Cash value will build up over time that you can borrow on 

Some companies have a 2-year or 3-year waiting period for modified premium whole life. 

The interest granted will also vary by the company. It’s important to note the interest granted is only based on the premiums you’ve paid and not the death benefit.

Some companies will go as low as 8%, and some will go as high as 30%, but most companies will pay around 10% interest on your premiums.

For example, if a company grants 10% interest and makes $1000 in payments, you will get back $1100 (if death occurs during the waiting period).

Lastly, you might see some carriers refer to modified benefit whole life insurance plans as “final expense life insurance, “funeral insurance,” or “burial insurance.”

The fact is that all those marketing terms mean the same thing. They’re referring to a whole life insurance plan with limited underwriting, so people with health conditions can still qualify.

A modified life plan is just a type of final expense insurance.

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Modified premium whole life insurance

modified premium whole life insuranceModified whole life insurance, a.k.a modified premium whole life insurance, a modified whole life policy typically comes with a lower initial cost. The premium will increase only once after the introductory period and then remains fixed for the rest of the policy. Buying a modified premium policy is a great way to obtain a higher death benefit sooner, before you’d normally afford the premiums, instead of waiting to buy coverage or buying more coverage when you’re older at a higher cost.

Many of these modified whole life policies won’t allow you to contribute to your policy’s cash value during this introductory period.

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Modified whole life vs graded premium

graded premium whole lifeThese policies are popular because they offer a lower premium in the early years of the policy, modified and graded premium contracts are a great solution for individuals who want and need the lifetime death benefit protection and contractual guarantees that a whole life insurance contract provides them but have a limited budget available today with the expectation that they know their financial situation will be changing in the future.

These features, along with some options, such as adding additional life insurance coverage without underwriting and disability waiver of premium, make graded and limited pay life insurance options a good fit for someone just starting in their career or owning a growing business.

These features make these contracts popular as a funding vehicle for BUY-SELL Agreements and Executive Compensation Programs.


What is a graded death benefit?

Each carrier is different, but if you have a life insurance policy with a “graded death benefit,” your beneficiaries won’t get paid the full death benefit if you die from illness or disease within the first 2 or 3 years after buying the policy.

Does death benefit count as income?

Generally speaking, when a life insurance contract beneficiary receives the death benefit, this money is not counted as taxable income. The beneficiary does not have to pay taxes on it.

What does modified benefit whole life insurance mean?

Modified whole life insurance is a certain type of whole life insurance that will offer lower premiums for a short time (usually two to three years but can be up to five or 10), followed by a slightly higher rate for the remainder of the policy.


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About Coach B.

After starting his financial career with Phoenix Home Life Insurance Company back in 1992, Scott decided he wanted to provide people with an easier and more enjoyable way to buy life insurance. That was the start of Coach B. Life Insurance, whose mission is to be transparent, honest, and helpful to customers — without ever bugging or pushing them.

In the years since then, he has worked tirelessly to improve the process of shopping for insurance. His goal is to make sure that everyone who comes to Coach B. — whether they end up buying a policy or not — has the best possible experience.

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