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Should You Consider Graded Benefit Whole Life Insurance?

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 is it right for your needs?

What is a Graded Death Benefit Life Insurance Policy?

Graded benefit whole life insurance is a permanent life insurance policy. This option differs from a term policy that ends after a specific period but is not the same as a whole-life plan.

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 stipulations exist in the terms and conditions of the plan.

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

Younger adults might see a two-year stipulation for death by suicide that prevents a total payout. For older adults, there could be caveats regarding their health or additional factors for a specific time.

If you have a graded benefit and a payout occurs during this period, the beneficiaries receive the premiums paid into the policy with a slight boost, usually 8% to 10% of the total amount.

Most graded benefit whole life insurance waiting periods are for 24 months, although some can be extended to three years. 

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What to Know About Graded Benefit Whole Life Insurance

Before choosing a graded premium whole life policy, it is essential to review the pros and cons of this approach to insurance to see if it suits your need.

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  • Niche Candidates. This policy is best for those with medical conditions that don’t pose an immediate threat. It’s for those with health concerns that would make buying life insurance impossible or unaffordable 10 to 20 years later.
  • Steady Premiums. The premiums will never change, no matter how long you own the policy. Even if you switch jobs, move to another state, or if your health deteriorates, they remain the same. Age is not a factor in what you’re expected to pay.
  • Zero Examinations. Most life insurance policies require a medical exam, which prevents some older adults from securing an accommodative policy. With the graded benefit approach, you can skip this step and receive guaranteed acceptance at a higher monthly rate.

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

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

What Are the Pros and Cons of Graded Benefit Life Insurance?

As with any life insurance policy, considering the graded benefit approach has several pros and cons.

Graded benefit life insurance policies are often cheaper than traditional ones because they come with limitations, such as a reduced death benefit and a waiting period before the full death benefit is paid out.Graded benefit life insurance policies come with reduced death benefits, meaning the beneficiaries may not receive the total coverage if the policyholder dies during the waiting period.
They typically do not require a medical exam, making them an attractive option for those with health issues that could impact their ability to obtain traditional life insurance.They often have a waiting period before the full death benefit becomes payable. If something happens to the policyholder during this time, the beneficiaries may only receive a portion of that amount – or nothing at all.
These policies are guaranteed to provide coverage for a specific amount of time, typically up to a certain age, as long as the policyholder pays the premiums on time.There could be limited coverage options, including a cap on the maximum death benefit available, which may not meet the needs of some policyholders. 

Why Choose Graded Benefit Life Insurance?

This type of life insurance is a niche product that is best for certain people, including the following points.

  • Applicants age 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 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 covers up to $25,000.


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 is that it requires answers to a few simple medical questions. If you can answer them correctly, 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 to shop around to see your graded death benefit life insurance rates. Each company has different requirements and charges different premiums. Get quotes from at least three companies to determine the best policy for you.