A graded death benefit is a feature of a guaranteed issue life insurance policy. Since it isn’t profitable for insurance companies to sell guaranteed issue life insurance to people who pass away immediately, these policies typically pay out a lower death benefit in the first few years of the policy. Usually, graded death benefits have a waiting period of two years. If the policyholder passes away before this waiting period ends, only a partial death benefit pays out. If the policyholder passes away after the waiting period, their full death benefit will pay out.