Graded Death Benefit Life Insurance

Graded death benefit whole life

A graded death benefit policy is a whole life insurance policy with a waiting period. It may be an option for people who cannot be approved for standard life insurance. There is no medical exam required. People who have been declined life insurance from all other companies can still get coverage through a graded benefit life insurance plan.

Graded death benefit policies have four basic features to be aware of:

• The full benefit is not paid out until two to a three-year waiting period. If an unexpected death occurs during the first two years, your beneficiaries will receive a tax-free benefit, but not for the full amount. There are two payment possibilities in this case: the return of your premiums during the first two years, plus interest, or a percentage of the death benefit.
• The payment during the waiting period is either graded or return with premium plus interest. A graded policy is the best option because it means that a percentage of the death benefit is paid out during the two-year waiting period if anything should happen to you. With a return of premium plus interest, you are refunded your dividends plus interest at a set rate, typically 10 per cent. Your beneficiaries will receive more with a graded policy.
• Rates are higher than for standard life insurance. As this is a high-risk policy, it comes at a higher cost. However, the rates are guaranteed for the rest of your life, and the policy will build up cash value.
• There are some health questions. Although acceptance is not guaranteed (unless you choose a more expensive guaranteed life insurance option), most people will qualify for graded death benefit life insurance. This includes people who have suffered heart conditions, cancer, and even stroke, provided that two years have passed since it occurred. Every insurance company has different health questions. Our knowledgeable agent can help place you in the least costly plan for your situation.