We’ve all seen them on TV. Those ads that offer guaranteed life insurance with benefits and premiums that won’t change as you get older. This type of life insurance is usually called graded benefit whole life insurance (or many times term life insurance), and is usually offered at amazingly low rates.
What the ads don’t tell you, or put in print so small it can’t be read easily, is that for normally the first two years the death benefit paid will only be equal to the premiums you’ve paid plus interest. The amount of interest may vary, but is generally somewhere between 7 and 10 percent.
In the third year, the beneficiary of your graded whole life insurance policy will receive the full face value of the policy, and if the death is accidental, there is no waiting period.
Graded whole life insurance, in some cases, can be a lifesaver for people who will generally live more than two years, but are unable to obtain traditional life insurance because of their age or certain medical conditions.
The types of medical conditions that could prevent you from getting traditional life insurance range from being insulin dependent to being confined to a wheelchair. Also if you have cancer, Alzheimer’s, or heart disease, you may not qualify for traditional life insurance policies.
In fact, depending on your illness you may not even be able to obtain preneed life insurance which pays for your preplanned funeral expenses.
In cases such as those outlined above, graded benefit whole life insurance may be your only option. Some insurance companies that offer graded benefit whole life insurance even offer policies worth up to $25,000.00, although the premium for that much graded benefit life insurance may be near double that of traditional life insurance.
In addition, there are very few companies that offer graded benefit whole life insurance to people under the age of 50. Most often graded benefit whole life insurance is offered in units, and you will pay a set price for any given number of units. Once you have it, it won’t change, but, the older you get the more the value of a unit decreases.
For example, if you are a 50 year old male, you can generally purchase 12 units of graded benefit whole life insurance for a benefit of $15,000. The same unit drops in value the older you are when you purchase this type of insurance. If you wait until you are 80 to purchase graded benefit whole life insurance, those same 12 units may be worth only a couple thousand dollars, and if you are over the age of 80 you may not be able to purchase this type of insurance at all.
Graded whole life insurance television ads also say that no health questions will be asked, which is true. The company will send you the information and the prices and let you figure out if you actually need this type of insurance. In addition, if you have not been previously turned down for traditional life insurance because of health reasons, you may be paying close to double for graded benefit life insurance, and be getting less coverage than you may be eligible for.
In conclusion, if the only form you can qualify for because of age or health reasons, then graded benefit whole life insurance may be a good option for you. However, before purchasing a graded benefit whole life insurance policy, you may want to see if you are eligible for a traditional life insurance policy.
No matter which type of life insurance policy you decide on – it is key that you compare quotes from many different companies to find the best value.
Posted in 
Tags: