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ERI Economic Research Institute is pleased to provide an expanded and updated glossary of commonly used compensation terms and formulas for your ongoing reference.Graded Premium Whole Life InsuranceA form of modified life insurance that provides for annual increases in premiums for a constant face amount of insurance during a defined preliminary period, with the purpose of making initial payments more affordable. Government-Mandated Benefits  Compensation News WebinarsFurther HR your training with our Distance Learning Center Webinars. These courses will earn you credits for a variety of certifications including, SHRM, HRCI, CCP and more. About ERIERI Economic Research Institute was founded over 30 years ago to provide compensation applications for private and public organizations. ERI Economic Research Institute compiles the most robust salary, cost of living, and executive compensation survey data available, with updated market data for more than 1,100 industry sectors. ERI collects salary survey data from internal surveys, third-party salary surveys, and public sources to calculate geographic salary differentials and assist with compensation planning. Try All of Our Software NowAccess a small portion of our data and experience our Assessor Series at your own pace. Reimagine the way you do salary planningERI provides a massive compensation database, but we also provide state-of-the-art software to analyze the database to fit your needs as a compensation professional. See our software features below. Popular SearchesCommon Compensation Terms and Formulas
Download Now Modified life insurance is any policy with an alternative premium payment structure. Premiums usually start lower, then increase after five to 10 years. Modified whole life insurance is the most common type but modified term life insurance also exists.
Fact Checked A qualified expert reviewed the content on this page to ensure it is factually accurate, meets current industry standards and helps readers achieve a better understanding of retirement topics. Cite Us APA Christian, R. (2022, July 25). What Is Modified Life Insurance? RetireGuide.com. Retrieved November 30, 2022, from https://www.retireguide.com/life-insurance/permanent/whole/modified/ MLA Christian, Rachel. "What Is Modified Life Insurance?" RetireGuide.com, 25 Jul 2022, https://www.retireguide.com/life-insurance/permanent/whole/modified/. Chicago Christian, Rachel. "What Is Modified Life Insurance?" RetireGuide.com. Last modified July 25, 2022. https://www.retireguide.com/life-insurance/permanent/whole/modified/. Understanding Modified Life InsuranceModified life insurance is characterized by premiums that change over time, usually five to 10 years after the policy begins. The death benefit protection stays the same, but the premiums aren’t level. After premiums increase, they typically stay consistent for the rest of the policy. Premium amounts typically rise only once. This contrasts with traditional or level life insurance policies, where premiums are locked in and stay the same over time. After the period of lower premiums expires, the cost of the modified life policy is usually higher than a traditional level life insurance plan. Modified life insurance may also be called:
Premium details — including when rates are scheduled to increase and by how much — will be clearly stated in the illustration and policy data page. Term vs. Whole Life Modified PoliciesModified life insurance can either be term life insurance or whole life insurance, which is a type of permanent life insurance. Term life policies last a specific time — such as 10, 20 or 30 years — and then expire. Permanent life insurance lasts your entire life and usually includes a cash value component, or savings account, that grows slowly over time. The most common type of modified life insurance is modified whole life insurance. Except for the premium payment schedule, modified whole life policies function similarly to traditional whole life policies. Modified whole life insurance builds cash value you can borrow against like a loan. You can also withdraw money from the cash value — minus any surrender fees. Pros and Cons of Modified Whole Life InsuranceModified whole life policies may seem like an affordable way to ease into permanent life coverage. However, it’s important to understand the pros and cons before making a decision. Advantages of Modified Whole Life Insurance Lower Premiums in the Beginning Because premium payments are lower in the early years of the policy, modified life insurance may be appealing if you can’t obtain better coverage — and you expect to make more money in the future.Face Value Does Not Change Even though premium payments are lower in the beginning, the face value of modified life insurance remains the same throughout the policy. So, the death benefit payout your beneficiary receives if you die never changes, no matter how much you pay for coverage.Permanent Coverage Modified whole life insurance offers a death benefit that never expires so long as premiums are paid. This contrasts with term life insurance, which only lasts for 10, 20 or 30 years.Modified premium whole life insurance has many moving parts. Make sure you fully understand any potential premium changes before completing an application. Drawbacks of Modified Whole Life Insurance Less Cash Value Accumulation Because payments are lower the first few years, the cash value component of modified whole life insurance accumulates more slowly than a level premium whole life product.Complex Most modified life insurance is whole life insurance. These policies tend to be much more complex than traditional term life insurance. They may also include fees and other costs.More Expensive Long-Term Although premiums may start out cheaper, modified premium whole life insurance typically leads to more money paid to the insurance company over the policy period. Also, whole life insurance is almost always more expensive than term life insurance — even if premiums are lower in the beginning.On Medicare? Maximize your 2023 savings! The Medicare Annual Enrollment period is now open. Visit GoHealth today to see what savings you may qualify for with a new plan. Is Modified Life Insurance Right for You?Modified whole life insurance is often marketed to younger people as a way to obtain permanent coverage at a more affordable rate. These policies are designed for people who cannot initially afford regular whole life premiums but who think they can afford higher premiums in the future. Whole life insurance is one of the most expensive options out there. So, initially paying less for a policy that lasts your entire lifetime may sound appealing. Tip Check your policy for a table of guaranteed maximum premiums and make sure you can afford any premium increases for as long as you want to keep the policy. People with chronic health conditions may also find the application and approval process easier for modified life insurance compared to some other insurance products. However, whole life insurance is almost always more expensive than a traditional term life policy. For example, a 30-year-old man in good health may purchase a 20-year term life insurance policy worth $300,000 for about $228 a year. In contrast, the same man would pay about $4,015 a year for a $300,000 whole life policy. Even if this whole life policy featured modified premiums during the first five to 10 years, the overall cost will be higher than a traditional term life policy. Last Modified: July 25, 2022 4 Cited Research Articles
What is graded premium whole life?A type of whole life policy designed for people who want more life coverage than they can currently afford. They pay a lower premium rate that increases gradually over the first three to five years and then remains constant over the life of the policy.
What is modified premium whole life?Modified whole life insurance is a type of whole life insurance that offers lower premiums for a short time (usually two to three years but occasionally up to five or 10), followed by a higher rate for the remainder of the policy.
What is the difference between modified life insurance and whole life insurance?Your premiums are locked in when you purchase coverage with a whole life insurance policy. As a result, what you pay stays the same throughout your coverage. A modified life policy allows for an introductory period where you'll have lower premiums, and then your premiums will go up.
What are the two types of whole life insurance?Variations on the standard policy might offer different investment options, payment schedules, or be designed for specific circumstances. The different types of whole life insurance include: Indexed whole life insurance. Guaranteed issue whole life insurance.
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