What Is Graded Benefit Whole Life Insurance Policy?

Graded Benefit Whole Life Insurance Definition
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    What is Graded Benefit whole life insurance? Not only are we going to give you the “Graded Benefit Whole Life Insurance Definition“, but we’ll go over why it’s a great product for some and a waste of money for others. Do you also want to know what is the best insurance company for graded benefits? We’ll cover that too. Let’s get started!


    Graded benefit policies are available with Simplified Issue and Guaranteed Issue policies.


    Graded benefit policies have a waiting period (usually 2 years) before the full death benefit is available.

    Graded Benefit Whole Life Insurance Definition

    Graded Benefit Whole Life is defined by when the death benefit will not be paid for the first two to three years, unless the death is accidental. 

    In other words, a graded death benefit is a waiting for those with significant risk factors that make traditional policies with immediate coverage unattainable.

    The term graded benefit is most commonly used with Final Expense, Simplified Issue and/or Guaranteed Issue policies. Insurers offer these policies without a medical exam or traditional underwriting. Since there is no underwriting with graded death benefit policies, companies take on a significant risk. This results in higher premiums compared to other types of coverage

    Waiting period?… Why would I buy a graded benefit policy?

    This question is asked a lot. First, there is no risk in buying a graded death benefit insurance policy.

    What I mean is…If you die during the waiting period – you won’t lose that money. Your premiums will be refunded plus interest (typically around 10-20%). Every company is different with their graded benefit terms.

    Some companies even pay a percentage of the death benefit. Below is an example of a 20% interest on premiums paid for a Year 1 Death. For Year 2,  20% of the death benefit will be paid. You can see that the full death benefit is available starting in year 3..

    Here’s the good news

    A Graded whole life insurance policy provides an excellent opportunity for people to buy coverage who typically would never be able to qualify for a policy.

    These policies are a type of no medical exam policy. However, they may have some health questions (more on that soon). The application is very easy and fast. Applications are typically completed online and over the phone.

    Here’s the bad news

    Graded benefit doesn’t provide day one coverage like traditional policies like term or whole life. The graded benefit is another way of saying there’s a waiting period until the entire death benefit is available to you. This waiting period is usually 2 years, but it can be different from company to company. Some companies have a 3 year graded benefit.

    What company is the best?

    Are you just looking for quotes or the best graded death benefit companies? We reviewed the top rated companies for guaranteed issue with graded benefits right here.

    Who should buy graded death benefit whole life insurance?

    Graded benefit is a policy of last resort. Why?…because you’re buying a policy that has a waiting period. These graded death policies come in 2 different forms:

    1. Simplified Issue
    2. Guaranteed Issue

    With a Simplified Issue Graded Benefit policy, you must answer medical questions to qualify for it. They’re called “Simplified Issue” because the application only asks a few knockout questions to qualify. 

    Simplified Issue vs Guaranteed Issue?

    Here is a quick rundown on the pros and cons of graded benefit Simplified Issue and Guaranteed Issue.


    • Simplified Issue has higher face amounts -some companies offer over $100,000 benefit (this is much higher compared to Guaranteed Issue) 
    • Guaranteed Issue does not have any health questions
    • You can’t be declined due to health with Guaranteed Issue


    • Guaranteed Issue has smaller face amounts (Maximum of $25,000)
    • Guaranteed Issue is the most expensive
    • Both Simplified and Guaranteed Issue have graded benefit waiting periods of 2-3 years
    • You need to pass the health questions with Simplified Issue

    What if I can’t pass the health questions?

    That’s where a Guaranteed Issue graded benefit comes in. When you first speak to your independent agent, they will find out if there are any companies that you can qualify for in order to save you money (and get covered immediately).

    If you can’t qualify for Simplified Issue, then a Guaranteed Issue graded benefit policy is your only opportunity for coverage.

    Graded Benefit Health Risks

    What kinds of health risks or knock out questions would make a graded benefit policy your only option?

    There are some common situations where you would need to buy a Guaranteed Issue policy. Each company may have different health questions on their application, but the following questions are fairly common. 

    Can you answer “No” to all the questions below?

    • Has you been diagnosed or received treatment for: Human Immunodeficiency Virus (HIV), Acquired Immune Deficiency Syndrome (AIDS), or AIDS Related Complex (Arc)?
    • Have you been diagnosed with a terminal illness?
    • Do you have a disability that where a wheelchair is required?
    • Are you confined to a nursing home or other facility?
    • Have you received a diagnosis of heart disease, kidney disease, cancer, diabetes or another serious illness in the last 24 months?
    • Have you had a stroke?
    • Do you have Alzheimers any other cognitive impairments?

    If you answered “Yes” to any of the questions above, a graded benefit individual policy may be your only opportunity for coverage.

    graded benefit life insurance companies

    graded benefit life insurance companies

    I stress the word “may” because some companies have different health questions. Some insurers ask more questions than others. It isn’t like every company has the same questions on their applications.

    With that said, if you are unable to qualify for traditional coverage, here are our recommendations…

    Top 3 Graded Benefit Life Insurance Companies

    These graded benefit companies typically show up with the best rates when we run quotes for our clients. Here are the best guaranteed issue companies available:

    1. AIG
    2. Mutual of Omaha
    3. Gerber

    Each of these companies are rated “A” or higher from A.M. Best. This shows that they are financially strong and have excellent reputations. If you’d like to learn more about these companies check our reviews on AIG, Mutual of Omaha and Gerber. Once again, these are only a few of the companies available. Your agent should be asking your the health questions like the ones above to see exactly what type of policy and which company can give you the best deal.

    How to buy the best graded death benefit life insurance policy?

    We cannot stress enough the importance of using an independent agent to help you find the best products at the most affordable price possible. 

    Independent agents have access to multiple companies. We know which insurers offer the best rates when it comes to buying graded premium life insurance.

    We hope this article gives you a good overview of these policies. They are a great solution for many shoppers who can’t otherwise qualify for traditional coverage.

    graded death benefit life insurance policy

    If you need any help or have any questions, please let us know. LIB is an impartial broker who represents dozens of companies. We help our customers pick the best carrier and options that’s right for them. We do not push any companies because we have access to all the top carriers. We don’t try to put shoppers into a plan that is not suitable for their goals and needs. Our number one concern is our clients and future policyholders.

    We offer you free consultations and work with you to understand your goals and then help you with an appropriate recommendation.  So, what are you waiting for?  Contact us today or visit our Quotes page and see how we can help you!

    Michael Quinn

    Michael Quinn

    Michael is a licensed life insurance agent, expert & owner of Life Insurance Blog. LIB has helped thousands of shoppers understand life insurance and secure affordable coverage.

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