Graded benefit periods are different than a contestability period in that graded benefits are a period of time at the beginning of a certain life insurance product that removes coverage for 2-3 years for a non-accidental death. Contestability periods are a period of time inside every insurance policy that allows for the insurance company to cancel or augment a life insurance policy if misrepresentation or fraud is discovered on the part of the insured.
Steve applies for a life insurance policy and lies about being a smoker. The policy is approved and issued at non-smoker rates; however, he dies a year later due to aggressive lung cancer. The insurance company can review the application and choose to deny coverage and issue a refund of premiums instead because he was dishonest during the life insurance application process.
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