Those late night commercials or mailbox solicitations for life insurance that say, “You can’t be turned down” are talking about graded benefit life insurance, also called guaranteed issue life insurance. There are no medical questions, no medical exams. The applicant must be mentally competent and be able to sign their own application. There is graded benefit term and graded benefit whole life. Eligible ages are generally from 40 to 80, with some variations depending on the carrier. Benefit amounts generally run from $2,000 up to $50,000.
One can be on death’s door with cancer, heart disease or AIDS and get this kind of life insurance. Alzheimer’s, however, you cannot. The catch is that you must wait 2 or 3 years to get the full benefit. If one passes away before then, other than by accident, premiums are returned plus interest. Criteria for judging competing carriers are the premium, the waiting period, and interest rate on return of premium.
Is it a good deal, or at least an okay deal? Presidential Life Insurance Company, a longtime seller of guaranteed issue whole life, made the news this week by showing a profit in the 1st quarter. There are other carriers, but Presidential is usually come up on any short list, so I’ll use them to give a sample quote.
Age 65
| Monthly Premium | Face Amount | Waiting Period | Return of Premium interest rate | Carrier | Graded Benefit Whole Life |
| $90.21 | $10,000 | 2 years | 5% | Presidential | After 2 year waiting period full benefit |
So that comes to $1,082.50 annualized a year for coverage for a $10,000 benefit. Remember that’s the monthly bank draft rate. It’s $1,002.30 a year if you pay it annually. As usual, paying annually is a better deal. Not hard to do in your head math on this one, but let’s see how it figures out exactly: $10,000 benefit divided by $1,082.50 annualized premium equals 9.2 years (10,000 ÷ 1,082.50 = 9.23)
So it’s value as a coverage depends on one’s situation and life expectancy. Since there’s return of premium, you can’t lose on someone passing away in a short period of time, you get your money back plus interest. However for someone who lives a relatively long time, despite poor health, may end up paying more premium than their policy is worth.