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What is Graded Benefit Life Insurance?

what is graded benefit life insurance

Written By Doug Mitchell

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA.  Doug has spent close to 30 years in the insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health.  Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

Holly Mitchell  &

Holly Mitchell’s background in life insurance insurance goes back to 1985 when she worked for her father who was a New York Life agent. Holly has a marketing degree from Auburn University and has had a life insurance license since 2008. In addition to advising life insurance for customers all around the country, Holly is our website fact checker.

Rob Pinner   &

Rob Pinner is the founder and CEO of Pinner Financial Services servicing all 50 states. Rob started his insurance career in 2002.

Louis LaBash

Results-driven and innovative life insurance professional with 30 plus years of life insurance industry sales and marketing experience. Recognized as a pioneer in the field, leveraging phone and internet channels to exceed personal sales of over $100 million during the first decade of the 21st century. Creator of a highly effective intuitive IUL life insurance sales software that facilitated the sale of millions of dollars of indexed universal policies by numerous life insurance agents. Proven track record as a Managing General Agent (MGA), Life Agent, IUL Life Insurance Sales Software developer, and leading-edge creator of insurance marketing tools, educational content, and delivery systems.

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Most people think that you get denied for life insurance because of a health condition.

However, there may be other reasons why someone may get denied for life insurance.

For example, a dangerous driving history that includes multiple DUIs or reckless driving, recent treatment for alcohol or drug abuse, a criminal record, or even a recent bankruptcy.

This article will discuss what to do if you have been declined for life insurance, as well as explain what graded death benefit life insurance means.

What Should You Do if You Were Declined?

Even if you were declined for life insurance it isn’t the end of the road.

Before you pursue a graded benefit life policy (which I will explain in more detail) you need to evaluate if simply one company declined you where another might approve you, or would all companies decline you.

This is where we – as independent agents who specialize in high-risk life insurance – can help. I’ve had several cases where one insurance company declines someone, and we turn around and apply to another company and get approval.

Each life insurance company has different underwriting guidelines and an appetite for risk, and having a knowledgeable agent help you in the process of applying can be the key between getting approved or denied for coverage.

Before you give up on a “regular” life insurance policy, make sure you really can’t get approved. When I say “regular” I mean a policy that isn’t a graded benefit policy, which I’ll now explain.

Graded Benefit Life Insurance

Once it’s clear that you can’t get “regular” life insurance policy what are the alternatives? Depending on your age, there are policies you can get approved for.

Sometimes called high-risk life insurance policies, guaranteed issue life insurance, or graded life insurance are all types of life insurance that are designed for those that are considered high risk and can not get a traditional policy.

So how do these policies work? As the name implies, a graded policy is “graded”. That means that there is usually an initial waiting period before the coverage is effective. Some life insurance companies have a 2-year waiting period, while others have a 3-year waiting period.

If the insured dies in those initial years of the waiting period, their beneficiary gets back all the payments the person made for life insurance, plus some interest. After the initial waiting period is over the full coverage amount is in effect, just like any other life insurance policy.

It’s also important to note that typically there is a limit to how much coverage an insurance company will offer graded policies. For example, Fidelity offers graded life insurance with their senior term and whole life plans, and the maximum coverage is $150,000, while United Home Life offers maximum coverage of $25,000 on their graded benefit plans.

Which Companies Offer Graded Benefit Life Insurance?

There are several carriers that offer this coverage, I’ll highlight two companies that I work with.

Fidelity Life

Fidelity Life’s graded benefit life insurance is available to seniors over 50 and is unique in that they offer both term and whole life. Most other companies that offer graded benefit coverage only offer whole life.

Fidelity offers up to $150,000 of coverage and has a very simple application and approval process – you can get approved in one day.

United Home Life

United Home Life also offers graded benefit life insurance. If you are younger than 50 and can’t qualify for Fidelity Life because of your age, United Home Life coverage starts at age 20. They offer whole life graded benefit up to $25,000.

With both Fidelity Life and United Home Life there are a few health questions you have to “pass” to qualify for coverage. If you don’t qualify with them, you can still find a Guaranteed Issue Policy.

How Much Coverage do You Need?

One of the main disadvantages of these plans is that you’re going to be severely limited on the amount of coverage that you can buy. Most companies will only allow you to purchase around $150,000, like Fidelity Life.

With a lot of families, this amount isn’t going to be nearly enough insurance protection.  Before you purchase one of these guaranteed issue plans, you should add up how much coverage you need.

The first number that you should look at is your overall debts and other final expenses. The first purpose of your life insurance is to help your family pay off any bills that you would leave behind if you passed away.

The next number that you should add to the equation is your paycheck. If you’re the main income earner in your home, make sure that your life insurance policy is large enough to replace your income. Losing someone that you love is never going to be easy, but your family could find themselves struggling to pay for any basic expenses, but that’s where your graded benefit plan comes in.

Once you’ve done these calculations, you may realize a guaranteed plan won’t give you enough protection.

Even if you’ve been declined for coverage in the past, don’t assume that you can’t get approved for a plan that your family deserves. There is a chance that we can help you get approved for a traditional plan that will give you more insurance protection at a lower cost.

Guaranteed Issue Life Insurance

With a guaranteed issue life insurance policy there are no health questions at all that you need to answer to qualify. One provider that offers this coverage is Gerber Life.

Yes – the same company you see advertising for life insurance for your kids also offers Guaranteed Issue life insurance for those who are 50 years and older. You can get up to $25,000 of life insurance without any qualifications, and there is an initial 2-year waiting period.

You’ve probably heard of others on TV like Colonial Penn or AARP, but they’re very overpriced.  Gerber Life is one of the top 3  competitive guaranteed issue products on the market.

Every insurance company is different, and all of them have different medical underwriting and rating systems. The quotes that you get are going to vary wildly depending on the company that you contact.

There are hundreds of companies on the market, and you could spend weeks calling different companies. Instead of calling those companies to find the best-graded benefit life insurance policy, let one of our independent brokers do all of the work for you. Working with one of our agents can help you find the perfect plan for you. We can save you both time and money on your life insurance search.

We hope this article gave you the information you need about guaranteed issue plans to make an educated decision.

If you would like to speak with us regarding your life insurance needs, call us at 800-712-8519 or fill out our quote form on this page.

Picture of Doug Mitchell, CLU

Doug Mitchell, CLU

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA. Doug has spent close to 30 years in the life insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health. Some other notable items about Doug: Top of the Table Million Dollar Round Table member (MDRT). (MDRT is a global, independent association of the world’s leading life insurance advisors) | Premier Partner with Lincoln Financial and Cabinet Member | Served two years as President of the Auburn/Opelika Association of Financial Advisors | Life Millionaire status at Horace Mann Insurance Company and was awarded the Life Agent of the Year Award | New York Life, Executive Council Member | Currently serves as President of Ogletree Financial, a life insurance General Agency. | Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

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