Colonial Penn Life Insurance Review: Is It Actually Good Deal For Seniors?
We’ve all seen the commercials with Alex Trebek promoting Colonial Penn Life Insurance and its affordability.
So I decided to take a closer look and see whether this is actually a good deal, especially for seniors.
Well it probably depends on your health situation. I’ll explain more in this article.
In this review, I’ll give you my honest opinion about the company, it’s policies, the fine print, costs, and much more.
About The Company
Colonial Penn, founded by the co-founder of AARP, has been around since 1968.
They started as a life insurance company for people aged 65 and older, but today they’ve included a term life insurance policy for people aged 18 to 75 and a whole life policy for people aged 40 to 75.
All of Colonial Penn’s policies don’t require a medical exam, which makes it easier for those in less than perfect health to get coverage.
Furthermore, Colonial Penn now offers several different policies, giving consumers a variety of affordable and easy-to-obtain options.
Who Is Colonial Penn Ideal For?
Colonial Penn offers competitive insurance rates compared to other guaranteed issue life insurance companies.
Their policies are best for those looking for low payouts and those who wouldn’t qualify for underwritten life insurance policies because of medical conditions or poor lifestyle habits.
Both the term and whole life insurance policies offer a maximum coverage amount of $50,000, which isn’t a lot.
Colonial Penn isn’t a suitable fit for those looking to leave a legacy for their dependents or to support their loved ones financially beyond the first few months following their passing.
It’s better suited for applicants that need coverage to help their loved ones pay for final expenses and/or cover their costs for a few months after they pass to allow time to grieve.
Guaranteed Acceptance Program
Colonial Penn’s Guaranteed Acceptance Program provides ‘guaranteed coverage.’
You don’t have to take a medical exam or even answer medical questions. Everyone is guaranteed a policy.
However, in exchange for the guaranteed coverage, you may have limited coverage and terms.
The Guaranteed Acceptance Policy is a whole life insurance policy. This means it’s good for your lifetime, as long as you pay the premiums.
It’s meant for final expenses, such as burial or funeral expenses but your beneficiaries may also use the funds to pay your final medical bills or settle any liabilities you leave behind.
The largest issue with the Guaranteed Acceptance Policy is the low coverage amount.
Colonial Penn offers its coverage differently than most insurance companies. They assign you a unit based on your age, gender, and location.
You then decide how many units you want to buy, from 1 unit – 12 units, each unit is worth a specific amount of coverage.
Though the coverage amount varies, the cost of each unit remains $9.95, so the maximum amount anyone would pay is $119.40.
Pros & cons
- You don’t have to worry about getting turned down due to poor medical history.
- It’s available for seniors aged 50 – 85.
- The coverage lasts for your lifetime (as long as you pay the premiums).
- The policy grows a cash value, which you can borrow against, with an average interest rate of 7%.
- Your rates remain the same for the life of the policy.
- You can pay your premiums monthly, quarterly, semi-annually, or annually.
- If you pass within the first 2 years of coverage, your beneficiaries only receive the premiums you paid plus 7% interest.
- Colonial Penn’s coverage amounts are low, even if you buy 12 units; you may not have enough to cover a standard funeral.
- You’ll pay much higher premiums for less coverage than you would at many other life insurance companies.
There’s a two-year waiting period.
If you die within that time, your beneficiaries won’t get coverage even if it’s an accident unless you purchase an Accidental Death Rider.
They will receive the premiums you paid plus the interest rate, but it’s not enough to cover much of anything.
Understanding a “Unit”
Colonial Penn is known for its ‘units’ of coverage.
Rather than choosing a coverage amount, such as $10,000, $25,000, or $50,000, you decide how many units you want to buy.
Each unit is worth a specific amount of coverage, which they base on your age, gender, and location.
For example, one unit would be worth $932 for a 65-year-old male in Colorado. If he wanted $10,000 in coverage, he’d buy 11 units for a total premium of $109.45 per month.
On the other hand, a 65-year-old female in Colorado will have a unit worth $1,333. So, if she wanted $10,000 in coverage, she would buy 8 units of coverage for $79.60 per month.
Term Life Insurance Policy
Colonial Penn’s term life insurance is a one-year level term insurance policy. Essentially, you renew your policy each year.
The premiums remain the same until you hit a new ‘age band,’ which on average is every five years, at which point your premiums increase.
You can secure Colonial Penn’s term life insurance from ages 18 – 75, but renew it up to age 90.
Unlike other term insurance policies, you don’t choose the term. Instead, you renew the policy each year that you still need it.
You can purchase up to $50,000 in coverage with this guaranteed term life insurance policy.
It’s available in increments of $10,000, $20,000, $30,000, $40,000, and $50,000.
The costs for coverage varies based on age, gender, and location. Here are a few examples:
- $50,000 coverage for a 21-year-old female in CO costs $14.12 per month
- $50,000 coverage for a 65-year-old female in CO costs $94.83 per month
- $50,000 coverage for a 21-year-old male in CO costs $18.96 per month
- $50,000 coverage for a 65-year-old male in CO costs $140.12 per month
Colonial Penn offers two riders that you can add to your term life insurance:
Living Benefit Selection
Add the Living Benefit Selection for an early payout option to access up to 50% of your life insurance if you experience a specific health condition such as a heart attack, stroke, or cancer.
Accidental Death Benefit Rider
Add this coverage to protect your beneficiaries if you die in an accident. You can buy coverage in $10,000 increments from $10,000 to $50,000.
Colonial Penn’s Term policy isn’t available in Montana, New York, and the Virgin Islands.
You may also only purchase a new policy up to age 75.
If you have a policy, you may renew it until age 90, but you can’t get a new policy once you hit 76-years old.
Whole Life Insurance Policy
Colonial Penn’s whole life insurance is a simplified issue policy.
While you don’t need a medical exam, you must answer health-related questions. You might also talk to an underwriter if he/she needs more clarification on your health history.
Colonial Penn’s whole life insurance policy is for anyone between the ages of 40-75 looking for lifetime coverage.
You don’t choose a term; you have coverage for life, as long as you pay the premiums.
The whole life policy also accrues a cash balance after the first 12 months. You can borrow from the balance if needed and pay a 7% interest rate on the amount borrowed.
Whole life insurance policies are offered in $10,000 increments between $10,000 and $50,000.
You may also add one of two riders, including the following:
Living Benefit Rider
This rider gives you early access to your benefits if you have a specific health condition. You can buy a rider for a heart attack, stroke, or cancer.
Accidental Death Rider
If you die in an accident, this rider pays in increments of $10,000 up to $50,000.
If you add riders, they add to your premium. It’s usually less than an additional $10 a month for each, but it’s something to consider when you budget for your premiums.
Whole life insurance has higher premiums since it provides coverage for your entire life.
Here are some sample rates:
- 40-year-old female in Colorado – $50,000 coverage – $56.79
- 40-year-old male in Colorado – $50,000 coverage – $76.04
- 65-year-old female in Colorado – $50,000 coverage – $222.16
- 65-year-old male in Colorado $50,000 coverage – $317.24
What Customers Say
Colonial Penn has an A- rating from A.M. Best.
Some customers love the simplicity of Colonial Penn’s policy, especially the lack of the medical exam.
However, there are quite a few complaints against Colonial Penn regarding their sales tactics, especially since they target seniors.
If you buy insurance from Colonial Penn, make sure you read the documents carefully, including the fine print, so you know what you’re getting.
If you are unsure of what you are getting, talk to a professional to ensure you understand the policy, its premiums, and what it covers.
Alternatives To Colonial Penn
It’s always wise to shop around for life insurance before choosing a product. Colonial Penn isn’t the only life insurance company out there.
If you do shop around, look for the following policies from other companies:
Term Life Insurance
Term life insurance provides coverage for the written term. Once the term expires, you either let it go, renew it (if allowed), or buy a new policy, but at higher rates, since you’ll be older.
Many companies provide term life insurance, but the best we found is Northwestern Mutual and New York Life.
Both offer extensive policies including renewable policies up to age 80 and 90, respectively.
However, you do need to undergo a medical exam with both companies, which may limit who is eligible.
Guaranteed Issue Insurance
Guaranteed life insurance offers guaranteed coverage for anyone. It offers the least amount of coverage for the highest prices because of the risk it presents to the insurance company.
Guaranteed issue insurance is becoming more common today and the two companies we like the most are Gerber Life and Mutual of Omaha.
Gerber Life offers policies from $5,000 – $25,000 with graded benefits if you die within the first two years.
Mutual of Omaha offers policies with $2,000 to $25,000 in coverage for anyone ages 45 – 85.
Simplified Issue Insurance
Simplified Issue insurance is like guaranteed coverage, except you must answer a few simple health-related questions to get coverage.
As long as you don’t have any indicators of chronic illnesses or major diseases as outlined in their policy, you can get coverage. Simplified issue is a little less expensive than guaranteed coverage.
MetLife and Mutual of Omaha offer great Simplified Issue policies.
MetLife offers policies between $10,000 and $100,000 for ages 18 to 70 years old and you can renew up to age 90.
Mutual of Omaha offers coverage between $25,000 to $300,000. Mutual of Omaha offers the option to convert to a guaranteed whole life policy up to age 70 too.
Final Expense Insurance
Final expense insurance provides less coverage but gives seniors a chance to secure a policy that pays for their end-of-life expenses.
If you don’t have enough saved and put aside for your funeral, burial, final medical expenses, or liabilities, final expense insurance may help offset the costs for your beneficiaries.
Mutual of Omaha and AIG offer the best final expense insurance alternatives to Colonial Penn’s options.
Mutual of Omaha offers coverage from $2,000 to $40,000 for anyone ages 45 to 85. They don’t penalize smokers, but they do conduct an in-depth medical and prescription background check.
AIG offers coverage from $5,000 to $25,000 for anyone ages 50 to 85.
While the coverage options are low, it can be great for those just looking to cover their final burial expenses since the average funeral costs around $10,000.
Should You Choose Colonial Penn?
Whether or not you should choose Colonial Penn depends on your current situation.
Are you unable to undergo a medical exam and pass? If so, Colonial Penn offers a decent selection of guaranteed coverage insurance options.
Just keep an eye out on the coverage amount, paying close attention to the units you purchase, as it works differently than standard life insurance.
Compare your options with around three other insurers that offer guaranteed insurance coverage to ensure that you get the most affordable rates as well as adequate coverage for your needs.