Last Updated: September 2020
Graded death benefit life insurance policies are built for people who can’t be approved for a standard policy, usually due to health problems.
Almost anyone can get life insurance through a graded death benefit life insurance plan, and there is no medical exam required. However, there are some downsides to this type of life insurance which we’ll discuss below.
We have experience working with all the best graded death benefit life insurance carriers and have been helping people find coverage for years. In this article, we’ll explain what “graded death benefit” life insurance is and how to secure the best policy for you.
If you’re looking for quotes, the best thing to do is give us a call. We’ll compare all the top graded death benefit life insurance policies on the market for you.
What is a Graded Death Benefit Life Insurance Policy?
In short, a graded death benefit life insurance policy is a type of life insurance that includes a waiting period before the full death benefit is in force.
There are 4 basic features you need to know about graded death benefit life insurance:
1. You Won’t Receive the Full Death Benefit for 2-3 years
With graded death benefit life insurance, you have to wait for 2 to 3 years, depending on the company, before your beneficiary can receive the full death benefit. This is called the waiting period.
If the insured person dies during this waiting period, one of the following things will happen.
- The insurance company will return of your premiums paid so far + interest, usually 10%.
- The insurance company will pay the beneficiary 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 2-3 years, you receive the full benefit.
2. Choose a “Graded” Life Insurance Policy Over a “Return of Premium + Interest” Policy
You always want a “graded” policy if possible.
This means that you are paid a percentage of the death benefit during the 2-year waiting period. With “return of premium + interest,” you are refunded your premiums with typically a set interest rate (usually around 10%).
From day 1, you are paid more from a graded life insurance policy if something were to happen to you than a “return of premium + interest” policy.
3. Rates are More Expensive than Other Life Insurance Policies
Graded death benefit life insurance policies are considered a subset of high risk life insurance. This means these policies are more expensive than a traditional term or whole life insurance policy, for example.
Be honest with your agent about your health, and they will recommend the lowest cost graded death benefit life insurance plan.
The good news is the rates are guaranteed level for the rest of your life and it will build some cash value.
4. Graded Policies Have Some Health Questions
Most people will qualify for a graded death benefit life insurance policy, even with cancer, heart problems, strokes, etc. if it’s been 2 years since the event or diagnosis happened.
Each company has different health questions.
Guaranteed acceptance life insurance policies with no health questions have a graded period as well. So there are graded death benefit options that don’t have health questions, but those policies are more expensive, so it’s best to answer some health questions if you can qualify.
How To Find the Best Graded Death Benefit Life Insurance Quotes
First of all, make sure you work with an independent life insurance agent that has access to the best graded death benefit options available and has the ability to compare the rates side by side.
Below is a sample of 6 graded death benefit life insurance policies for a 66-year-old male.
Once your agent views the best rates based on your age, date of birth, gender, and smoking status, the next step would be to see if you qualify for the best quotes presented.
In the sample above, we would see if you can qualify for Gerber guaranteed issue life insurance because they are guaranteed acceptance.
Every graded death benefit life insurance policy has different qualifying questions, so the key to finding the rates is sorting through all the options available and finding the cheapest company that your unique risk fits into.
Be Careful of Those “Special Offers”
There are a lot of advertisements on the internet and TV offering coverage for $1 the first month. What they’re not telling you is this is a graded death benefit policy and rates will go up every 5 years. In our Globe Life Insurance review, you’ll see that they are one company known to do this.
These are all graded policies these policies are almost always more expensive than what we can help you secure on the open market.
There are only a couple dozen companies that offer graded death benefit life insurance and our network of agents have access to the most competitive ones. If you’re looking to buy graded death benefit life insurance coverage, call us today to help.