Disclaimer: We are not Colonial Penn Life Insurance Company nor are we affiliated with Colonial Penn in any way. If you need to reach the company directly, please call 1-877-877-8052.
The Colonial Penn Life company was founded in 1968 by AARP co-founder Leonard Davis. The company is based in Philadelphia and owned by CNO Financial Group. Colonial’s specialty is offering life insurance directly to the consumer at a lower cost through the mail, internet, phone calls, and TV.
Their most popular plan is the guaranteed acceptance life insurance policy, which is offered exclusively for those 50- to 85-years-old. They were one of the first companies to offer a guaranteed issue policy in 1968.
Related: Top 20 final expense companies.
You also want to read about a similar company called Globe Life.
Colonial Penn Company Ratings
According to AM Best, Colonial Penn Life has an A- (Excellent) rating as of August 26, 2015.
A high financial rating means that the company is financially solvent, which means they are able to pay claims to their policyholders. It’s an important point to consider before you buy a policy, but you should never stop there.
This rating indicates nothing about the quality or service or how and if a product will be good for your specific needs. Types of offered policies, underwriting process, benefit amount, and your current health should be your foundation when looking for a life insurance policy.
Guaranteed Acceptance Whole Life Insurance from $9.95/month
This is an offer advertised by Colonial Penn Life. What they don’t say here is actually how much $9.95 can buy.
Colonial Penn Life sells “units of coverage.” The unit premium never changes, and they sell 1–8 units. 1 unit costs $9.95, 2 cost $19.90, 3 cost $29.85, and so on up to 8 units, which cost $79.60.
Here is the issue: While the price per unit never changes, the unit max benefit (or the face amount, as we call it in insurance jargon) is set by your age and what Colonial Penn Life decides is appropriate. So 1 unit costs the same $9.95 for a 77-year-old and a 50-year-old, but the 77-year-old’s benefit amount is $503 while the 50-year-old’s is $1786.
Both of these coverages are inadequate for a life insurance policy, but what I really don’t appreciate is luring clients with the $9.95 slogan and units. Life insurance is baffling already; why make it worse for those who are unfamiliar with the business?
Colonial Penn Life Units Explained
How Much Coverage Can $9.95 a Month Buy?
What Products Do They Offer?
Colonial Penn offers three products: guaranteed acceptance, whole, and term life policies. Each policy has different issue ages and maximum face amount benefits. However, they all have in common one benefit: no medical exam requirement. However, I personally wouldn’t consider that a benefit, because you will be paying more for the convenience of not taking an exam.
As a rule of thumb: if a company offers you no exam and no health questions, you will be paying more, and the face amount will be lower. Some policies have graded benefits, which means the policy wouldn’t pay benefits for the first 2–3 years. So buyer beware.
Let’s find out what each policy entails.
Colonial Penn Guaranteed Acceptance Life Insurance
Guaranteed issue products typically don’t have coverage higher than $25,000, and they also have a graded benefits clause, which means the carrier won’t pay the full benefits if you die within 2 years after you bought the policy. You may be entitled to 10%–15% interest depending on the company.
With Colonial Penn Life, the guaranteed policy is a little different. They don’t have benefits up to $25,000 like the others do; what they have are the “units of coverage” I mentioned earlier. These represent the face amount or a benefit amount we are all familiar with when shopping for a life insurance policy. This is permanent life insurance with a cash saving component that requires no health questions or exam. The issue ages are 50–85 in most states.
- 1 unit represents the face amount for a specific age. For instance, if you are 50 years old, 1 unit represents $1786 in benefits, 2 units represent $3,572, and the max you can buy is 8 units for $14,288 in benefits. Here’s the issue. First, this isn’t enough coverage by any means. Second, if you bought the policy when you were 80 years old, 8 units would represent only $3,408, and 1 unit would be $426 of face amount. You don’t have a choice in the amount of coverage; it’s based on age and units. Your benefit is based on your gender and age when your coverage takes effect.
This is a very deceiving marketing tactic. Using units for a set $9.95 per month per unit is confusing to most potential customers who don’t really understand units and are used to hearing about lifetime benefits and term length.
- Colonial Penn Life also mentions a 30-day money back guarantee on every web page. Again, what most consumers aren’t aware of is that all insurance companies offer this. It’s called a “30-day free look period.” It’s a standard in our industry and is required by law for all carriers. While I’m not against showing this, don’t count it as a benefit.
Colonial Penn Term Life Insurance
Term life is the easiest policy to understand. You pay per month for coverage that lasts for a specific amount of time or contract. If you die within this period, your beneficiaries will collect the face amount you bought. There are no cash benefits, and the premium is lower than with other types of policies such as whole life.
It’s a very different case with Colonial Penn Life. The initial premium is based on your age you’re your coverage takes effect and will increase as you enter a new “age band.” Let me explain: Say you bought a policy when you were 42 years for 35 per month. When you reach 46, the same policy will cost you $45 per month, and when you reach 51, it will be $57. Coverage can only be renewed up to the age of 90. You aren’t buying a “leveled premium policy”; you are buying a policy that changes every 5 years. How great is that?
The issued ages are 18–75 years (renewable up to 90). There is no physical exam requirement, but they do ask health questions. The benefit amounts are $10,000, $20,000, $30,000, $40,000 and $50,000 only.
- Colonial Penn Life claims that there is a cash value to the policy. I have never heard of a “term policy” that offers cash value. Here is a quote from the Colonial Penn Life site: “Depending on how long you’ve had your coverage, cash value may be available to borrow against at a guaranteed interest rate.” This is unusual, so I’d keep an eye on it.
- It’s too expensive for a no exam policy. For example, a 41-year-old man would pay $45.12 for $50,000 in benefits with Colonial Penn Life, and his premium would increase every 5 years until the age of 90. The same individual could buy a no-exam $250,000 30-year term policy with SBLI for $36.67 per month, and his premium will stay the same for 30 years.
- As I mentioned above, your premium isn’t leveled. Every five years, it will increase, which isn’t ideal when you buy a policy.
Colonial Penn Term Insurance Sample Rates
Male Sample Rates
Female Sample Rates
Colonial Penn Term Life vs. Other Carriers’ Sample Monthly Rates
This is a comparison between Colonial Penn and other insurers. The above illustration is for a 40-year-old male in a preferred health condition. The max benefit with Penn Life is $50,000 for $45.12 per month. The rates with all carriers are for $250,000, 30-year term for $30.19 per month.
Colonial Penn Whole Life Insurance
As the name implies, whole life will last for the rest of your life. There is a cash value to a whole life policy, which you can borrow against. Most financial advisers recommend that their clients buy term and invest the difference, and I tend to agree. However, I do recognize that some individuals want whole life and nothing else.
So let’s look at some of the details in Penn’s whole life policy. The issued ages are 40 to 75 years old. The benefit amounts are $10,000, $20,000, $30,000, $40,000 and $50,000 only. There is no medical exam, but you will have to answer some health questions and could be denied. The premium is based on the age and gender when the coverage is obtained.
Premiums are payable to age 121 or as long as the insured is living, and coverage matures and becomes payable at age 121. The premium remains the same and will not increase; coverage can’t be canceled as long as premiums are paid. Based on Colonial Penn Life’s site, you begin to build a cash value after a year of coverage and can use that for a loan.
- It’s too expensive. For example, a 65-year-old would pay $317.24 per month for a $50,000 in coverage with Penn but could buy a policy with Assurity for the same $50,000 for $260.57.
As you are aware by now, there is no substitute for shopping with ALL companies and not dealing with one particular carrier. It’s your responsibility as a consumer to do some homework and reach a conclusion.
I could say that anytime you see a company that sells directly without the involvement of brokers, this should worry you. You might say, I don’t want to talk to anyone; I’d rather buy direct. What you fail to understand is that a broker is on your side. He/she isn’t a customer service agent in a call center you will never talk to again.
A broker represents all the carriers except for one that doesn’t allow him/her in, and he/she wants you to have the best policy because this is how he/she gets paid. You may buy a guaranteed issue policy when you are completely healthy and have no idea that you just bought the worst policy available. A broker will help you avoid that.
Regardless of whom you choose to buy a policy, two things are certain:
1. Prices are fixed by law, which means you will not get a “deal.” The rates are calculated by the underwriting department based on gender, age, health, and history, to name a few.
2. You still need to talk to someone. There isn’t a way to buy a policy without talking to someone, even if you buy online.
I’ll close with this: If you are healthy, avoid Colonial Penn at all costs. There are better options out there. Even if you need a guaranteed issue policy, you will find better policies with Gerber, AIG or even AARP.
Buying life insurance was never intended to be done the same way as buying airline tickets for the reasons above. Consider working with a broker to avoid any pitfalls.