Graded Death Benefit Life Insurance

People that can’t obtain life insurance coverage through traditional means will have to go with a guaranteed issue whole life insurance policy.


graded death benefit

What is graded benefit life insurance

what is graded benefit life insuranceThe definition of the graded death benefit is the waiting period imposed on all guaranteed issue life insurance policies that restrict the payout within the first 2-3 years. If you pass away during the graded period from natural causes, the insurance carriers will not pay the death benefit to your beneficiary.

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Under a graded premium whole life policy

under a graded premium whole life policyA 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 policy’s life.

Level vs graded life insurance

level vs graded life insuranceIf you start out with a graded premium, you have the option of changing to a level, fixed premium on your policy anniversary. When you switch to a level premium, you lock in your rate at your attained age, the age at the time of the change. Level, fixed rates are usually about 40% more expensive than the graded rates.

Graded death benefit whole life

graded death benefit whole lifeA 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.

Graded death benefits

graded death benefitsPeople who cannot get approved for a standard insurance plan are the usual consumers of graded death benefit insurance. Typically, these people are the elderly or those who have chronic diseases with short life expectancy. Guaranteed issue plans and final expense policies employ graded death benefit. These policies do not require the insured to undergo a medical exam, unlike the traditional life insurance plan. Graded death benefit protects the insurance carrier from disbursing benefits for natural death.

Graded death benefit life policy

graded death benefit life policyThe graded death benefit arrangement is different for every insurance carrier. Some firms pay a refund of the premiums plus a 10% interest (rates also vary per carrier). It is a money-back guarantee for the policyholder and their family. Other firms offer a gradual death benefit raise. For instance, if the policyholder dies of a non-accidental death a year after his enrollment, the firm will not disburse its beneficiaries’ full benefit. Instead, they will pay out a small percentage of the benefit. They will give a larger amount if the insured dies on year two, and so on. It is helpful to speak with an agent like Coach B.  who can help you find the perfect plan for you. 

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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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