Level and graded life insurance policies are two types of life insurance options that differ primarily in how they handle coverage and premiums, particularly concerning pre-existing health conditions and the risk associated with them.
Level Life Insurance Policy
With a level policy, you pay a consistent premium throughout the life of the policy.
This type of policy typically offers coverage without an initial waiting period for the full death benefit. As long as the premiums are paid, the full death benefit is available from the start.
It often requires a medical examination or health questionnaire during the application process. Those in good health may qualify for better rates.
Graded Life Insurance Policy
Graded policies are often designed for individuals who may have health issues or pre-existing conditions that could pose a higher risk to the insurance company.
These policies usually have a waiting period, typically one to two years, before the full death benefit is available. If the insured passes away during this waiting period, the beneficiaries may receive a reduced payout or only the return of premiums paid.
Graded policies might not require a medical exam or thorough health questionnaire, making them more accessible to individuals with health concerns. However, this increased accessibility often comes with higher premiums.
In summary, the key difference lies in how these policies handle health considerations, waiting periods, and the availability of the full death benefit. Level policies usually offer immediate coverage (pending approval) with consistent premiums, while graded policies might have a waiting period and potentially higher premiums but might be more accessible to individuals with health issues.