A graded benefit A life insurance policy is a type of life insurance that usually offers a limited death benefit for a certain amount of time, usually the first few years of the policy. Over time, the death benefit slowly goes up until it reaches the full amount set by the policy.
Most of the time, graded benefit policies are made for people who may have trouble getting traditional life insurance because of their health or other risk factors. They are often marketed to older people or people who already have health problems, and they may be given out without a medical exam or questions about health.
With a graded benefit structure, the insurance company accepts the higher risk of insuring people who are more likely to die in the first few years of the policy. This risk is lessened by the small death benefit.
For example, if you buy a $10,000 policy, your insurance company will pay 40% of that $10,000 benefit if you die in the first year, 75% in the second year, and the full amount starting in the third year.