Know Your Graded Death Benefit Options


As most of you know, I work with a lot of high risk life insurance prospects.  Many times I can help them with traditional coverage – other times I can’t.  In those times that I can’t help them with traditionally underwritten life insurance – I always go to plan B:

Graded Death Benefit Life Insurance

This is where agents lose a lot of business simply because they’re not offering this option.

What Is a Graded Death Benefit Life Insurance Policy?

It’s a high risk life insurance policy that has a waiting period before benefits are paid – usually 2-3 years.  And yes, it’s expensive compared to traditional coverage.

However I’m always surprised at prospect’s premium tolerance when they know graded death benefit life insurance is their only option.  The trick here is to make sure your prospect knows it’s their only option.

My Graded Death Benefit Presentation

This is how I present graded death benefit.   I know other agents who present it differently and successfully, but this is my personal approach.

  1. Like all conversations, start with the “why” and press on it.  Why are they buying this coverage?  If it’s to protect their family – is there really a price on that?Something along the lines of:”I know you initially approached me for life insurance because your wife and kids are financially dependent on you, so I’d like to give you the next best option since traditional coverage isn’t available for your risk.”
  2. Explain what a graded policy is.”It’s called a graded death benefit life insurance.  Have you heard of these policies?” – Usually the answer is no.”The only difference between a graded policy and a traditional policy is there’s a 2 year waiting period before full benefits are paid off.  That’s it – after 2 years it’s just like you have a traditional life insurance policy.  So during those first 2 years, if something were to, God forbid, happen to you, the life insurance company would refund your premiums with interest and if it was an accident, they would pay out the full benefit….and we both know you’re not going anywhere soon” (gets them to agree and/or laugh)
  3.  Present the rates.Usually there’s sticker shock.  In which case I say:” Some coverage is better than nothing at all –  I know you don’t want to leave behind a financial burden, so let’s find a payment you’re comfortable with and see how much coverage you can qualify for.”

That’s all I do.  Some will buy, most won’t.  At least you gave them the option.  Like anything – pitching graded death benefit is a numbers game.  If you keep pitching it, you’ll make the sales.

These last 2 weeks I’ve placed several graded death benefit policies.  Each of these people were declined life insurance from a previous agent and NONE of them were offered a graded death benefit plan.  I had to explain to each one exactly what it was.

Case Study #1

This guy was just declined by Northwestern Mutual because of Hepatitis C.  He’s had it for 15 years, yet never follows up on it.  Hadn’t seen a doctor in 5 years which isn’t good for anyone with a chronic condition.  I flat out told him he needs to see his physician and get a liver biopsy done if he wants traditional coverage otherwise everyone will decline – he wasn’t willing to that.  So I offered him a graded death benefit term life insurance from Guarantee Trust Life.  $50k for $177/mo.

The reason I chose Guarantee Trust Life is they’re the only one who had a 10 year graded term policy in California.  He only needs this coverage for 8 years for re-payment of a peer to peer loan.  I emailed the simple application and he sent it right back to me signed and ready to be submitted.

The way I sold this one was I told him what he needed to do to get the best rates.  He wasn’t willing to do it, so I gave him plan B.  He had to take it.

Case Study #2

This was a high risk life insurance referral from another agent who asked me to take care of their client.  This prospect had Huntington’s Disease.  He was declined several times and was told he couldn’t qualify for coverage by other agents.  I immediately went to my graded death benefit “go-to” carriers to find the lowest rate.  I suggested United Home Life $25k graded whole life at $95/mo and he didn’t even flinch – I emailed the completed application and he sent it right back within the hour signed with payment information.

I believe it’s because I painted the picture that he couldn’t qualify for traditional coverage and took the 2 minutes to explain graded death benefit coverage.  The first agent to pitch this guy graded coverage would have had the sale.

My Go-To Carriers

Let me preface that these are MY go-to carriers.  We’re all independent and can use any carrier we want.  There are other carriers I could use, but I like to make things easy.  I know these graded plans like the back of my hand and can quote them over the phone without hesitation.

That’s the key here – pick 2-3 graded plans and know them inside and out.

Many graded death benefit plans have switched to a 3-year waiting period.  I used to sell Fidelity graded 90% of the time because of their 2 year waiting period, online application and 48 hour turnaround time, but since they switched to their Senior Life graded product which has a 3 year waiting period and is a bit tighter on underwriting  than the old product,  I rarely use them UNLESS someone wants to use a credit card (they’re the only one’s that will take credit card payments).

My go-to “phone friendly” graded death benefit carriers are United Home Life because of the 2 year waiting period (as opposed to 3 year) and ease of doing phone business  – short, simple applications and field underwriting.  For those under 45 years old, I use Guarantee Trust Life which has a 3 year waiting period.

Are there better priced options for graded death benefit  out there- Yes.  However the price difference isn’t that big.  I’ve vetted most of them – some don’t allow you to sell over the phone, some charge state licensing fees in each state you do business and others applications are just too restrictive for my liking.

It’s important to recommend a product with a SIMPLE application when you’re selling this over the phone.  There’s already too many obstacles to overcome with the waiting period and higher pricing – make it as easy as possible for them.

If your client sees a 10 page application, chances are they’ll put it on the backburner.  I personally complete the application over the phone with them and send it to them for signatures.  If you send them a pre-completed application – chances are much higher it comes back.

Also, since it’s a non-med product and as long as they answer the questions truthfully, you’re going to place 90+% of the applications you submit.  Cha-Ching.

Bottom Line

There’s a lot of money being left on the table if you’re not offering graded products to your life insurance declines OR to your high risk leads who need coverage.  Like everything else in this business, it’s a numbers game – most won’t buy, but some will.  When they do buy – it’s always a decent sized premium.

My advice: grab 2 or 3 graded death plans, study the qualifying questions and be able to quote them on the fly.