Graded Life Insurance

Written by Jason Fisher

Graded Life Insurance

Unsure what graded life insurance is? Graded life insurance is a kind of policy with the purpose of insuring those difficult health concerns which other life insurance companies deny.

Maybe you have a medical condition which is hard to insure, or maybe you’ve already been declined for traditional life insurance.

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If this is you, we can help you find affordable coverage.

If you are healthy, this is not the type of life insurance you’re looking for. Graded life policies have a specific use, and if you can qualify for regularly underwritten policies, this type of insurance won’t apply to you.

Even if you’ve been declined for life insurance in the past, don’t assume that graded life insurance is your only option. Every insurance company is different, and some of them are going to be stricter on the type of applicants that they accept, which means that you may have simply chosen the wrong company to apply with. There is still a chance that you can be accepted for a non-graded life insurance plan, but it’s vital that you understand all of your options.

Perhaps you’re older and need insurance or you are searching for life insurance for young adults. Whatever the need, we can help you find the coverage you deserve.

Graded Life Insurance

Someone who has health concerns which are not easily insured are faced with the tough battle to find a carrier who is willing to not only offer coverage, but do so at an affordable premium. Unfortunately, not all companies will agree to cover you because of unusually high risk.

Graded life insurance is a product which aims to solve both those issues. It offers the insurance carrier a way to mitigate some of its short term risk, and it also allows the person attempting to purchase the life insurance a way to do so at a much lower premium.

In a nut shell, graded life insurance is a policy which won’t pay out the full amount, and sometimes none at all, in the first months after a policy is issued. But after a pre-determined time period, the life insurance death benefit pays out 100% of its applied amount. This time period can be something like 24 months.

Here’s an example of a pay structure:

  • Months 0-12: No insurance payout
  • Months 12-24: 50% death benefit payout
  • Months 24+: 100% death benefit payout

So as long as you live at least two full years after the day your graded policy is in force, then you can expect to receive the full death benefit amount so long as you continue paying your premiums.

Here are some frequently asked questions about graded life insurance, because it’s not a mainstream product offered by all agents. You will likely need an independent agent to work with, like us.

But What About My Premiums?

Good question. Obviously it’s a bit of a risk for you, the consumer, because if you pay your premiums on time over the first year and you die, it would seem to be a waste of money. But, here’s the good news. The cash you pay as a premium is often returned to your heirs if you pass in that time period. In some cases, the price you paid plus a bit of interest is returned as proceeds to your beneficiaries.

If something were to happen to you in the first two years, all of your premiums are not going to be lost, which is one of the main concerns that applicants have when they are going to buy a graded benefit life insurance policy. After the first two years of the policy, then your life insurance policy is going to operate like a typical insurance policy, and at that point, you won’t get a return of your premiums, but you’ll get the full payout.

How Much Coverage Can I Get?

Because it’s not a traditionally underwritten life insurance policy, you can expect much lower death benefit amounts. The face amount might be anywhere from $5,000 to $50,000, for example. An insurance company would be at a much higher risk if it allowed significantly higher coverage amounts, because they know there’s a greater chance they’ll have to pay than someone who is your same age, yet healthy.

This is one of the biggest disadvantages of the graded benefit life insurance plans, you’re going to be severely limited on how much coverage that you can buy. For most families, $50,000 worth of coverage isn’t going to be enough if something were to happen to you. Not having enough life insurance will leave your family with thousands of dollars of additional bills and final expenses that they wouldn’t have the money to cover.

Before you apply for one of these policies, it’s important that you determine how much coverage your family is going to need if something tragic were to happen. There are several key categories that you’ll need to account for when calculating your life insurance needs.

The first number that you should look at is your debts and other final expenses. The main goal of your life insurance is to give your family the money that they need to pay off the bills that you would leave behind. Add up your mortgage, medical bills, student loans, and any other outstanding debts. Make sure that your life insurance is larger than all of those bills combined.

The next number that you should look at is your annual income. If you have someone that relies on your salary, it’s important that they have the money that they need to replace your paycheck if something were to happen to you. If you don’t have anyone that relies on your salary, then you can consider getting a smaller policy that will save you money.

Can I Be Declined?

This depends on the type of graded life insurance you apply for, and from which company. One company may offer a graded term life insurance policy where they ask medical questions. This policy is not guaranteed, and you could be turned down. On the other hand, a company may offer a true guaranteed issued graded whole life policy where you can’t be declined. Depending on your situation, one might be more appropriate than the other, because there are differences in cost.

Because each company is different, it’s impossible to say if you could be declined for a graded insurance plan, but in most cases, it’s very easy to be approved for one of these policies. The majority of plans are only going to require that you answer a couple of questions and then you’ll have life insurance coverage.

Where Can I Find Graded Life Insurance?

Not every carrier has this kind of policy. In fact, a minority of insurers do. You’ll probably need to inquire with us about your medical conditions first, as this type of policy is more of a last resort. Certain high risk policies can still be offered at more affordable rates from more mainstream companies. But if this is something which suits your needs, we can point you toward the handful of carriers who are currently offering, and we’ll get you quotes as well.

Working with an Independent Insurance Agent

The best way to ensure that you’re getting the best plan for you and your family is to work with one of our independent insurance brokers. Unlike a traditional insurance agent, independent brokers work with dozens and dozens of highly rated companies across the nation. Every company is different. One company may reject your application while others are going to offer you affordable life insurance protection. It’s vital that you find the best company for you. Instead of wasting hours and hours calling different companies, let one of our agents bring all of the best insurance rates directly to you.

If you or someone you know is struggling to find life insurance because of diminishing health, contact us today to see if this can meet your needs, as well as your budget. Graded life insurance is an option, but remember, it’s mostly for those who have severe cases or who have already been declined by other carriers. Call us for free quotes and additional information.

It’s our mission to ensure that you’re getting the best life insurance at the lowest price. We have years of experience working with all types of clients across the nation. We know which companies are going to give you the best policy, even if you have severe health conditions. Life insurance is one of the most important investments that you’ll ever make for your loved ones, and nothing should prevent you from getting the coverage that they deserve.

You never know what’s going to happen tomorrow. Nobody wants to think about their death, but you shouldn’t wait any longer to get life insurance. Contact one of our agents today and we can get the process started.

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