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Graded Benefit Whole Life Insurance: Is this What Are You Looking for?

Life insurance isn’t a one-size-fits-all approach. Each applicant has different needs, and sometimes those are graded death benefit life policies. These policies are great for applicants who need guaranteed coverage because they don’t have the best health but want lower premiums.

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How does graded benefit whole life insurance work, and who should use it? Read on to learn more.

What is a Graded Death Benefit Life Insurance Policy?

Graded benefit whole life insurance is a permanent life insurance policy. This differs from a term policy that ends after a specific period, but it’s also not the same as a whole-life policy.

Here’s how.

A permanent life policy offers the same death benefit from your first premium payment to the day you die. There’s no waiting period (unless you commit suicide or a crime).

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Waiting Period on Graded Benefit Plan
There is a Two Year Waiting Period, and You Can’t Help that!

A graded benefit whole policy has a waiting period. If you die within the graded benefit period, your loved ones receive only the premiums you paid plus a small percentage (8-10%). The waiting period usually lasts 2 years, but each policy differs.

Like a standard permanent life policy, your premiums never increase over the policy’s life.

It may not sound like much at this point, but if you look at interest rates at the bank, your life insurance policy will give a much greater return should you die within the graded benefit period.

Please note that…

Suppose you make it past the initial two-year waiting period. In that case, the death benefits stated in the policy go into full force, and your beneficiaries receive the amount listed on the life insurance.

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For example, if the graded premium permanent life insurance has a $100,000 face value, your beneficiaries would receive $100,000 if you died one day after the two-year waiting period.

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What You Need to Know about the Graded Premium Whole Life Policy

Before you choose a graded premium whole-life policy, you should understand a few important things so you can fully comprehend the pros and cons of this type of policy.

Good Candidates

Are Seniors Good for GBL Policy?
Can I Qualify?

This policy may seem great for everyone since there’s no underwriting and everyone is approved. Still, its niche market is those with medical conditions which will deteriorate years down the road, which would cause incredible increases in life insurance premiums.

Remember that the policy is best for those with medical conditions that don’t pose an immediate threat. It’s for those with medical conditions that would make buying life insurance impossible or unaffordable 10 to 20 years later.

Some examples of medical conditions that would make it worth it include (but aren’t limited to)

Relative: Top insurance companies that offer no exam life insurance.

Steady Premiums

One of the largest benefits of graded death benefit life insurance is the steady premiums. The premiums will never change, no matter how long you own the policy. Even if you change jobs, move to another state, or if your health deteriorates, they don’t change. No matter how old you get, the price remains the same.

Considering that many life insurance options will cost more to purchase as you get older, having a policy that stays at the same rate is a significant financial benefit.

No Examinations

No Medical Exm Means No Hassle and Guaranteed
Hooray! Medical Exam is Not Required. Pic: Flickr.

Most life insurance policies require a medical exam, which prevents many people from securing life insurance. With a graded benefit policy, you don’t have to take a medical exam. If you have a medical condition that will cause significant premium increases, it’s nice to know you can get a graded benefit policy with no increase.

However, the downside is that you’ll pay higher premiums to cover the higher risk insurance companies take.

Keep in mind that

This insurance policy was not designed to be cheap but rather consistent, so you don’t face increased premiums as you get older (or are sick). Because you represent a higher risk to insurance companies without the medical exam, you will pay more for insurance.

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Graded benefit life insurance is best for seniors ages 50 to 70 years old. Some companies may sell to older seniors, but 80 years old is usually the cutoff.

Most insurance companies quote the policy using units. This gives you a timeline to pay the premiums before the full benefits take effect. The younger you are when you buy the policy, the lower the premiums may be.

Pros and Cons of Graded Benefit Life Insurance

Like any policy, this policy has several pros and cons.

Pros Cons
You may qualify even if you have a health condition since there’s no underwriting The premiums are higher than typical permanent life insurance policies
You don’t have to undergo a medical exam Your loved ones don’t get the full benefits if you die within the graded benefit period
The premiums never change  
If you die after the graded benefit period, your loved ones get the full death benefit  

Why Choose Graded Benefit Life Insurance?

This type of life insurance is a niche product that is best for certain people, including:

  • Applicants ages 50 years and over
  • Applicants who want to pay the same amount in premiums each month
  • Seniors expected to live for at least the next two years
  • Seniors with a medical conditions will get progressively worsen over time.

Which Companies Offer Graded Benefit Life Insurance?

Many companies offer GBL insurance to applicants who don’t qualify for other life insurance policies.

Two of the most common companies are TransAmerica and Mutual of Omaha. While TransAmerica has many immediate coverage policies, they have a GBL insurance policy for those who don’t qualify. Their plans start at $40,000, but people in older age brackets may only get coverage for up to $10,000.

Mutual of Omaha offers such a policy if you don’t qualify for their standard life insurance policy. The policy is mostly for seniors and goes up to $25,000 in coverage.


What’s the difference between level and graded benefit life insurance?

Level life insurance offers benefits immediately without a waiting period. If you die 6 months after you take out the policy, your loved ones will still receive full benefits.

With a graded death benefit policy, your loved ones only receive full death benefits if you die at least 2 years after taking out the policy.

What’s the difference between simplified issue and guaranteed issue insurance?

Simplified issue insurance doesn’t require a medical exam, just like guaranteed issue doesn’t. The difference, however, is simplified issue insurance requires answers to a few simple medical questions. If you can answer them right, you can secure coverage, but if not, you may need guaranteed issue coverage that doesn’t require any medical questions.

How long is the graded benefit period?

All graded benefit life insurance policies have a waiting period of at least 2 years. This is why it’s best for those who don’t have terminal illnesses but rather chronic illnesses that may worsen as you age.

Shop Around

It pays shop around to see the rates you’ll get on graded death benefit life insurance. Each company has different requirements and charges different premiums. Get quotes from at least three companies to determine the best policy for you.