Graded death benefit life insurance policies are a god-send for some people. Specifically for people over the age of 50 and in poor health. You can be declined from life insurance from all other companies and still get life insurance through graded death benefit plan. There is no medical exam.
So what is a graded death benefit life insurance policy? In short, it's a life insurance policy with a waiting period.
As a consumer, there are 3 basic features you need to know about graded death benefit life insurance:
1. You don't receive the full benefit for 2 years (3 years with some companies). This is the waiting period. There are 2 types of graded policies: return of your premium during the first 2 years + interest OR a percentage of the death benefit. Either way, if an unexpected death happens within the first 2 years, your beneficiaries will still receive a tax free benefit, it just won't be for the full amount. Make sure your agent goes over this with you BEFORE you submit an application. After the first 2 years, you receive the full benefit.
2. Rates are expensive compared to standard policies - you have to realize this is a higher risk policy. Be honest with your agent about your health, and they will recommend the lowest cost graded death benefit life insurance plan. Good news is the rates are guaranteed level for the rest of your life and it will build some cash value.
3. There are some health questions - it's not guaranteed issued. Although most will qualify even with cancer, heart problems, strokes etc. Each company has different health questions so speak with your agent and they'll place you in the lowest cost plan available for your situation.
There are only a handful of life insurance companies that offer graded death benefit life insurance. Make sure your agent offers all of them, it can save you a lot of money by using one company over another.
