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There’s such a thing as no medical exam life insurance policies, but there’s one problem.

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They all have graded benefits. To summarize, this means your loved ones don’t get your full death benefit if you die right away. Most policies have a waiting period of 24 – 36 months.

If you die within that time, they’ll receive the total of the premiums you paid to that point and a small premium, usually about 10%.

So why do life insurance companies do this? What’s the benefit?

Why Life Insurance Companies Have Graded Benefits

It seems strange to offer a policy that won’t pay out right away, right?

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Here’s why.

Life insurance companies take a risk insuring you. If you were to die a week later, they would have to pay out the full death benefit if they didn’t have graded death benefits. This means they would payout on a policy on which you made only one premium payment.

That doesn’t sound like a good business model, right?

Since certain life insurance policies, including guaranteed issue life insurance, don’t require a medical exam, life insurance companies have to protect themselves. With a medical exam, they’d know if you had a severe health issue and could die within the next couple of years. Without it, though, they are taking a chance.

They protect themselves with the graded benefits, so they don’t have to pay out more than the premiums you paid should die within the waiting period.

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Who Should Consider Graded Benefits Life Insurance?

The policy doesn’t sound very inviting, does it?

Who wants to pay premiums with a chance their loved ones won’t receive a full payout? Believe it or not, there are some reasons to consider it.

  • You won’t pass a medical exam.

You may not pass a medical exam if you have any major health issues. This could leave you without life insurance. But with guaranteed issue coverage, you can get covered but will have to wait 2 – 3 years for full benefits to begin.

  • You only need a small amount of coverage.

Most guaranteed issue life insurance policies offer up to $25,000 in coverage. This is usually enough for final expenses and is usually the people who choose it. Final expense coverage helps your loved ones pay for your funeral and other final costs upon your death.

Who Shouldn’t Consider Graded Benefits Life Insurance?

Just like there are people that should consider graded benefit policy, there are just as many people that shouldn’t.

If any of these ring true for you, look at other options:

  • You need more than $25,000 in coverage.

Guaranteed issue life insurance usually only offers up to $25,000 in coverage. If you’re looking for a policy that offers greater benefits so you can support your family or leave behind a legacy, graded benefits aren’t the answer.

  • You are in good health.

If you can pass a medical exam, don’t bother with the guaranteed issue coverage. Even though it seems easier because you don’t have the hassle of medical questions or a medical exam, you’ll pay higher premiums than necessary. Instead, look at standard life insurance options, including term or whole life insurance.

If you aren’t expected to live beyond 2 years, a guaranteed issue life insurance policy doesn’t make sense. Instead, save or invest the money yourself, earning interest rather than paying the administrative fees life insurance companies charge.

Final Thoughts

Graded benefits have a waiting period to protect insurance companies. Without it, insurance companies wouldn’t be able to offer guaranteed issue life insurance policies, which can be very helpful in certain situations, especially for seniors without any money saved for their final expenses.


Meet Aaron H., a senior life insurance agent from California with 15+ years of experience. With a major in finance, excellent analytical and communication skills, and a passion for helping clients find personalized solutions, Aaron is a trusted advisor in the industry. He stays up-to-date on the latest trends and developments by attending webinars and workshops, reading industry blogs, and writing informative blog posts on this website. Aaron also has a keen understanding of SEO and online marketing, which he uses to help his clients reach a wider audience and get the coverage they need. He cherishes spending quality time with his wife, two children, and elder parents.