Traditional life insurance is low risk and offers guaranteed maturity returns to policyholders. Nontraditional life insurance combines investment and insurance in a single policy. These plans invest in the market and have the potential to earn higher returns because of their higher-risk nature. If you have not been able to obtain traditional life insurance, you should know about these nontraditional life insurance plans.
Graded Life Insurance
Graded life insurance may be an option if you cannot get approved for standard life insurance. No medical exam is required. This type of whole life insurance policy comes with a waiting period for full death benefits. The payout is graded on a schedule, depending on how much time has elapsed since you purchased the policy.
Full death benefits are not paid out until after two or three years have passed with graded life insurance. If death occurs during that waiting period, your beneficiaries will receive tax-free benefits, but not the full amount of the policy. They may receive a return of your premiums plus interest (typically 10%) or a graded payment, which is a percentage of the death benefit. Graded policies are better because your beneficiaries will receive more.
As graded life insurance policies are considered high risk, rates are higher than for standard policies. On the plus side, this type of policy builds cash value, and the rates are guaranteed for life.
Although there are some health questions, most people can qualify for graded life insurance — even individuals who have had heart conditions, cancer, or suffered a stroke – provided two years have passed since the occurrence. Graded insurance policies may serve as a last resort for people with major health problems who could not get life insurance otherwise.
Guaranteed Issue Life Insurance
Guaranteed issue life insurance is also known as guaranteed acceptance life insurance or no questions life insurance. It is a permanent, whole life policy that does not require a medical exam. You do not have to answer health questions or allow the insurance company access to your medical records. The insurer guarantees it will issue you a life insurance policy as long as your age is within the allowed range at the time you apply. The age range is typically 50 to 80.
However, this life insurance comes with a catch, which is the waiting period of two years for most policies and three years for some. If your death occurs during the waiting period, your beneficiaries will only get a return of all your premiums plus interest, usually 10%.
Cash death benefits with guaranteed life insurance range from $2,000 to $25,000. These policies have higher premiums in relation to death benefits than other types of life insurance.
Graded and guaranteed life insurance are two options to consider if you have not been able to get standard life insurance. The main disadvantage with both types of policies is the required waiting period during which your beneficiaries will not receive full benefits. Meet with our friendly agent to review all your life insurance options.