Often, people receive offers in the mail for graded benefit life insurance policies and they enroll, not fully understanding what that term means.
When you purchase any type of life insurance plan, one of the most important aspects is the death benefit. The death benefit, or face amount, is how much your beneficiary will receive if you pass away. In most cases, the beneficiary will receive the full death benefit amount you purchased even if you pass away right after the policy is issued. However, graded life insurance polices only offer the full death benefit after 2 or 3 years. If something happens to you in the first couple of years, depending on the insurance company's policies, your beneficiaries will receive the premiums that have been paid plus some interest, OR, a significantly reduced percentage of the death benefit.
Graded benefit plans are usually whole life insurance plans with a death benefit of less than $40,000 and only require the applicant to answer a few health questions. Sometimes there are no health questions asked at all.
The benefits of these policies can vary widely between insurance companies and plans, so as we always recommend, read the fine print carefully when purchasing this type of policy. You want to know when the full death benefit will start and what amount will be paid to the beneficiaries prior to that time.
Although it is tempting to purchase a plan through the mail. Often you can find a plan better suited to your needs by speaking with a licensed insurance broker.
If you need help finding the right policy for you or a loved one, call us or schedule a quick, convenient online video consultation.