What is a graded death benefit and why do some policies have one?

A graded death benefit means the policy pays only a limited amount if you die from natural causes during the first two to three years, rather than the full face value. Typically your beneficiaries get your premiums back plus some interest during that waiting period, with the full benefit kicking in only afterward; accidental death is usually covered in full from day one. Graded benefits appear on guaranteed-issue and some final-expense policies that skip medical underwriting, which is how the insurer protects itself against people buying coverage when already seriously ill. If you are healthy enough to qualify for a fully underwritten policy, avoid graded-benefit products, because they cost more and pay less in the early years.