Graded Whole Life Versus Modified Whole Life

For all of you insurance nerds out there, there is a difference between graded whole life and modified whole life. Modified whole life is the more general term – it is any whole life plan where the benefits change over time. Ordinary whole life never has a change in benefits. Graded whole life is a subset of modified plans. Graded plans have a percentage of the death benefit that will only pay for accidental death during the first two or three years. There are two types of graded policies.

One type is often found on TV commercials and junk mail, talking about guaranteed acceptance and no medical questions. In exchange for no medical questions, the policy doesn’t pay any death benefit for the first two years unless its an accidental death (accidental death triggers all of the death benefit to be paid). In the case where its not accidental, all premiums are refunded along with interest. I’ll have a future blog post that discusses why people shouldn’t automatically jump to these plans without talking to an agent about qualifying for something better. Long story short, you should aim to get a simplified issue whole life policy to cover your burial or cremation needs.

Another type of graded whole life is less extreme and offers a gradual increase in the percentage of death benefit paid for non accidents. This type has a very small amount of underwriting. All graded plans behave the same as an ordinary whole life policy once the limited coverage period ends.

Navigating Life Insurance Terminology

Navigating life insurance terminology can be a daunting task because there are so many product names. To make matters worse, some product names are not official names of a product. For instance, burial insurance and final expense insurance are merely marketing buzz words used instead of the actual product name: simplified issue whole life. Another example is guaranteed acceptance life insurance, which is known by it’s real name as modified whole life. I can understand why these marketing terms are used. In the case of burial insurance or final expense insurance, the marketing terms help clarify the purpose of the insurance. Using the marketing term “guaranteed acceptance life insurance” is devious, however, because it draws attention away from the product’s negative aspects. If you have any questions, you are always welcome to contact us.


Accelerated death benefit riders allow a policyowner to receive all or a portion of the death benefit early if certain conditions are met. A recent article said accelerated death benefit riders are synonymous with critical illness riders and terminal illness riders. This is incorrect. Accelerated death benefit riders will pay out for a terminal illness, but not a critical illness. Terminal illness is defined as a non-curable medical condition that, within reasonable medical certainty, will result in death in 12 months or less. Critical illness is defined as a heart attack, stroke, or cancer. Notice there is no prediction of life expectancy with critical illness. Critical illness riders only pay out for a critical illness.

Some accelerated death benefit riders pay out if there is permanent confinement to a nursing home. Critical illness might indirectly lead to a pay out if someone had a bad stroke that led to permanent confinement. In every policy I’ve seen, this rider is automatic and free of charge. If fact, if you don’t want the rider, your only option is to make a written request to the insurance company. I don’t see the point in refusing the rider because the benefit payments are not automatic (you have to make a written request to receive payments).