Tennessee Life Producer Practice Exam

Question: 1 / 400

What is a graded death benefit?

A policy that offers a full death benefit immediately upon issuance

A policy that provides a reduced benefit if the insured dies within a certain period after issuance

A graded death benefit is a type of life insurance policy that provides a lesser amount of death benefit if the insured passes away within a specified period after the policy is issued. This initial period typically ranges from one to two years. If the insured dies during this time, the beneficiaries receive a reduced payout, which might be a return of premiums paid or a percentage of the face value. After this period, the policy pays the full death benefit.

This structure is commonly employed in policies issued to individuals with higher health risks or those who might not otherwise qualify for standard coverage. It serves as a means to mitigate the insurer's risk while still offering coverage to those who might need it. Therefore, option B accurately reflects the nature of graded death benefits, distinguishing it from other types of policies that do not have these specific terms and conditions attached.

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A policy that accumulates cash value over time

A policy that pays dividends to the policyholder

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