What is the definition of Graded Premium Policy?
A Graded Premium Policy is the kind of policy that provides for three or more premium increases throughout the life of the policy, until the specified level premiums are reached.
A Graded Premium Policy provides the policyowner who want an amount of coverage that they could not really afford to pay the premiums for at the moment. What happens is that they pay a low rate of premium at the start of the policy, then that premium increases gradually for a specified period (like three to ten years) and then the premiums remain level for the rest of the life of the policy.
This is also sometimes called a graduated premium life insurance.
The advantage of this kind of policy is that it starts with a low premium, but offers a level death benefit. This kind of policy may also offer a dividend. However, with this policy, cash values tend to grow slowly, especially on the early parts of the policy.
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