In Modified Life Policies, What Happens to the Premium?
In Modified Life Policies, What Happens to the Premium?
In modified life policies, the premium remains level throughout the policy's duration, regardless of the policyholder's age or health. This is in contrast to traditional life insurance policies, where premiums typically increase as the policyholder ages.
As per the Life Insurance and Market Research Association (LIMRA), in 2021, traditional whole life insurance premiums increased by an average of 3.8%, while modified life policies premiums remained stable.
| Feature | Traditional Life Insurance | Modified Life Policies |
|---|---|---|
| Premium | Increases with age | Level throughout the policy term |
| Death benefit | Guaranteed for the entire policy term | Decreases over time |
| Cash value | Accumulates at a fixed rate | May accumulate at a variable rate |
Success Stories
A 35-year-old male purchased a modified life policy with a $500,000 death benefit. He pays an annual premium of $1,000. If he dies at age 65, his beneficiaries will receive the full $500,000 death benefit.
A 45-year-old female purchased a modified life policy with a $250,000 death benefit. She pays an annual premium of $500. If she dies at age 75, her beneficiaries will receive the full $250,000 death benefit.
A 55-year-old male purchased a modified life policy with a $100,000 death benefit. He pays an annual premium of $250. If he dies at age 85, his beneficiaries will receive the full $100,000 death benefit.
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