What is a Graded Benefit - Whole Life Insurance

Graded benefit whole life insurance, also known as GBL insurance, is a specialty type of whole life insurance that is usually offered as life insurance policy for people that might have a hard time getting other types of life insurance. The policy usually pays out limited death benefits during the first few years, and usually requires premiums that are somewhat higher than standard life insurance policies.

The First Few Years

Many insurance companies offer limited benefits during the first and second years. Most policies will only pay the premium amounts collected plus interest which ranges between 5% and 20%, depending on the insurer. Most graded benefit policies reach the face level amount for the death benefit between 3 and 7 years. Only after the policy has “matured” will the death benefit be the amount of the face value of the policy. These policies continue to accrue some amount of cash value the entire length of time that premium payments are made. However, cash benefits will usually not equal a matured policy death benefit until the insured has reached age 100 or more.

May Be the Only Option for Some People

Because these types of policies often don’t require medical exams are even a medical questionnaire, they may be the only life insurance coverage option available to some people. These types of policies are best suited to people that will probably live more than 2 years but are at risk of passing away within the next 5 to 10 years.

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