Many insurance shoppers — especially older adults — consider Colonial Penn a good option for final expense insurance.
It may be the best insurance option for some shoppers; however, most people can find better coverage at lower monthly premiums.
Should you choose Colonial Penn? Or can another company provide more coverage for less?
Check out this review for a closer look.
In this review:
Colonial Penn Life Insurance
Colonial Penn spends millions of dollars each year on marketing campaigns aimed at senior citizens who don’t have life insurance and can’t easily qualify for full coverage.
With Colonial Penn, just about anyone within the right age range (50-85) is guaranteed coverage.
But this guarantee comes at a cost: higher premiums and small face amounts.
Colonial Penn Life Insurance Products
All three of these coverage options — and their slight variations — are easy to qualify for, but they also offer small coverage amounts at a higher price.
None of these policies require a medical exam, making them convenient to buy, but many leading insurers also have no-exam options with more coverage for less.
Guaranteed Acceptance Life Insurance
In most states, applicants ages 50 to 85 can qualify for this policy, which could provide about $15,000 in coverage with no medical exam.
Like most guaranteed issue policies, Colonial Penn requires a two-year waiting period before your full coverage level is available to your beneficiary. If you died within the two-year limited benefit period, your death benefit amount would be a fraction of its value unless your death was considered an accidental death.
- Easy to qualify
- Expensive for such a small death benefit
- Confusing rate schedule
Whole Life Insurance
Applicants ages 40 to 75 can get up to $50,000 in coverage through this whole life policy, which does not expire and builds a small cash value. The application won’t include a medical exam, but you can expect to answer some health questions. Not everyone will qualify, but most people in the age range will.
- Easy to qualify
- Level premiums
- Lack of transparency about cash value’s growth and interest rates
Renewable Term Life Insurance
Applicants ages 18 to 75 can buy up to $50,000 in term life insurance. No medical exam is required, but the application will ask some health questions.
- Easy to qualify
- 75 is a generous age for getting a new term policy
- Price increases every 5 years
Colonial Penn’s whole life and term life policies offer an optional accelerated death benefit rider that lets you claim part of the coverage early if you have a heart attack or get diagnosed with a condition such as Alzheimer’s or some forms of cancer. The guaranteed issue policy does not offer this feature.
If you happen to live in Vermont, New York, or Montana, your state doesn’t allow Colonial Penn Life Insurance Company to sell you a policy.
Colonial Penn Rates
Colonial Penn Life Insurance has its own unique way of selling policies.
Life insurance rates are based on “units of coverage” instead of selling policies by face amount.
Life Insurance Starting at $9.95 per Month
Colonial Penn makes its living on guaranteed issue policies, which it sells by units of coverage instead of by dollar amount of coverage.
Selling insurance by “units” lets the company charge a simple price — $9.95 per unit, per month.
The problem with this approach is that the shopper may not know what a unit is worth — what they’re getting for their $9.95 a month.
How Much Insurance Coverage Do You Get for $9.95 with Colonial Penn?
Actually, the value of a unit of coverage changes as you age.
For example, a $9.95 unit provides $1,786 in coverage for a 50-year-old. The same $9.95 unit provides only $418 in coverage for an 85-year-old.
You could buy up to 8 units, which would cost $79.60 a month. For an 85-year-old, this premium would provide maximum coverage of $3,344.
For reference, a 50-year-old in good health could buy $500,000 in term life for about $80 to $90 in monthly payments with a medically underwritten term life insurance policy.
That’s 10 times the coverage for the same price!
Is Colonial Penn Life Insurance A Good Deal?
Unless you truly can’t qualify for a simplified issue life insurance policy or a final expense policy, you’ll pay too much with Colonial Penn.
Term Life Pricing
When you buy a term life policy, you normally lock in a premium rate that lasts throughout the policy’s term, whether it’s 10 years, 20 years, or 30 years. During this term, your premium stays the same or level.
With Colonial Penn’s term policy, your price increases every five years, and you can keep the policy until you reach age 90. You wouldn’t get level premiums.
The twice-a-decade rate spikes become more significant as you age. A 50-year-old man would pay about $56 a month for $50,000 in term life coverage. An 88-year-old male would be paying $800 a month for the same coverage.
That’s right — $800 a month for $50,000 in life insurance coverage. That’s incredibly expensive.
Whole Life Pricing
Colonial Penn’s whole life insurance works more like a traditional permanent life insurance product. The coverage doesn’t expire as long as you pay the premiums (and are younger than 121).
What’s more unusual is Colonial Penn’s regimented death benefits. You could buy a $10,000, $20,000, $30,000, $40,000, or a $50,000 policy.
While you could be denied coverage based on your answers to the company’s health questions, most applicants age 40 to 75 will get approval.
However, this blanket approval drives up the prices you’ll pay. If you’re healthy enough to qualify for a more exclusive policy with another insurer, you can save a lot on your premiums.
Colonial Penn Customer Reviews
The Better Business Bureau (BBB) currently gives Colonial Penn an A+ because the company responds to every complaint.
Still, the company has been sued countless times for charging inflated premiums that are not risk justified or even fully disclosed to policyholders.
According to Colonialpenn.com, the company offers a 30-day money-back guarantee if you change your mind about the coverage.
However, many customers don’t become upset with their life insurance plan until a few years go by and the price for their term coverage starts to increase — long after the 30-day full refund period has expired.
Is Colonial Penn Life Insurance a Scam?
Despite my problems with Colonial Penn’s marketing tactics, the company is not fraudulent. It’s not part of a scam.
In fact, the company has a reputable past and is financially stable with an A.M. Best rating of A-.
Alternatives to Colonial Penn Life Insurance
Yes, having a Colonial Penn plan is better than having no life insurance at all, but it’s still not the best choice.
Who do we recommend instead? These are 3 of the best life insurance companies in 2021.
- Haven Life – For quick-term life insurance coverage, especially if you’re healthy. Haven Life sells only A.M. Best top-rated MassMutual policies.
- AIG Direct – For a strong company reputation, AIG writes a ton of quality policies.
- Banner Life – For flexibility and customer service.
Is Colonial Penn Life Insurance Best For You?
Colonial Penn sells a lot of guaranteed acceptance life insurance policies that do not require a medical exam and ask very few health questions.
If you really do need guaranteed issue coverage, a Colonial Penn life insurance policy may be just what you need.
But if you do not have a serious health condition, you can get coverage for less money — normally a lot less money.
Why Guaranteed Acceptance Insurance is Not Ideal
Why? Because the insurance company takes a lot more risk with guaranteed acceptance.
Higher Risk = Higher Rates
Since it requires no medical exam and asks so few, if any, questions about your health, Colonial Penn doesn’t know whether you’re at risk of dying next week or in 20 years. To stay in business, it has to assume everyone’s high risk and charge accordingly.
If you’re familiar with life insurance already, you know that your premiums are impacted by coverage amount and your health.
How Much Life Insurance Do You Need?
A Colonial Penn Guaranteed Acceptance policy will pay out only a fraction of the death benefit you could get with a medically underwritten term policy or even many whole life insurance policies.
So one of the first questions to answer is how much coverage do you need?
Many people buy a life insurance plan to provide financial stability for their loved ones after they die. The death benefit from your policy could pay off credit cards, pay off a mortgage or auto loan, or prepare for future needs.
If this is true for you, a Colonial Penn policy probably won’t be large enough for you.
If you’re buying life insurance for final expenses, you may need only $10,000 to $15,000 in coverage. A Colonial Penn policy could do the job, but as I said above, you could find better coverage for less if you’re in average good health or better.
Should You Buy Colonial Penn Life Insurance?
Like I said above, Colonial Penn may be the best deal for some people who happen to be in poor health and couldn’t qualify for a better policy anyway.
The life insurance industry has tons of better options for people of average, good, or excellent health who don’t smoke. Even shoppers who do have health problems can often find better coverage from other life insurance companies.
Famous and trustworthy spokespeople such as Alex Trebek, Ed McMahon, and Joe Theismann help assure TV audiences Colonial Penn offers them the coverage they need.
These ads don’t lie. Just about anybody can, indeed, qualify for this kind of life insurance. But these ads do fail to mention Colonial Penn’s high costs and low coverage amounts.
They also don’t inform viewers that an independent life insurance agent could find them more coverage for less money — and with no waiting periods or medical exams.
There’s a reason insurance agents call guaranteed issue the last resort for coverage.