If you watch any television at all, it’s likely that you’ve seen Alex Trebek talking about guaranteed acceptance insurance from Colonial Penn Life Insurance Company. Colonial Penn specializes in offering and providing life insurance for seniors who may or may not have medical issues that could prevent them from purchasing traditional life insurance. The company does provide other types of life insurance but the purpose of this article will be to focus on their guaranteed acceptance product.
Guaranteed Acceptance Life Insurance from Colonial Penn
Colonial Penn’s guaranteed acceptance insurance, also called guaranteed issue insurance, is whole life insurance that is traditionally marketed toward seniors because there are no health questions asked and no medical exam required. Today, most people refer to this type of insurance as Final Expense or Burial Insurance.
It’s important to note that since guaranteed acceptance life insurance requires little to no underwriting, it is always priced higher than traditional life insurance and should only be considered a policy of last resort. Unfortunately, many seniors let their emotions get the best of them and call for coverage shortly after watching their television advertisements which intentionally plays on the consumer’s emotions.
There have been complaints alleged against the company that the guaranteed acceptance policy has a two-year waiting period when if the insured dies as a result of natural causes, no benefit will be paid to the beneficiary. However, most other companies that offer guaranteed acceptance insurance with the two-year waiting period will pay a modified death benefit that is typically the sum of all premiums paid plus 10% interest.
Colonial Penn’s Guaranteed Acceptance Insurance Pricing
Colonial Penn uses an unusual method of pricing for its guaranteed acceptance insurance. The pricing for coverage is based on unit price and the amount of insurance in a unit is based on the risk profile (age, gender, and location) of the applicant. The pricing method is rather simple in terms of calculating life insurance rates since the risk profile determines the death benefit of a unit and all units are priced at $9.95 per unit.
Since the maximum value of a unit of coverage is about $2,100 and the maximum number of units that can be purchased is 8 units, the maximum death benefit for a qualified applicant would be $16,800.
Here is an example of how a policy is sold and then issued:
Mrs. Jones, a sixty-year-old woman in average health is offered a unit of coverage equal to $1,635 in coverage at the rate of $9.95 per unit. Mrs. Jones wants to get as much coverage as possible so she purchases the maximum amount of units which is eight. Her death benefit after the two-year waiting period would be $13,080 with a monthly premium of $79.60.
How does Colonial Penn’s Policy Compare to other National Carriers?
As we mentioned earlier, a guaranteed acceptance or guaranteed issue policy should only be purchased as a last resort. These policies are for applicants who have severe or multiple health issues and cannot qualify for traditional life insurance that has a level death benefit and first-day coverage.
Here are some comparisons using Mrs. Jones, the 61-year-old woman in average health who is purchasing a $13,808 policy from $79.60 per month from Colonial Penn:
|Colonial Penn Life||AIG Life|
|Colonial Penn||Mutual of Omaha|
It is important to consider that if Mrs. Jones would have qualified for a level benefit policy, her monthly payment would have been half of the Colonial Penn payment and she could have bought a much higher death benefit if she wanted to.
Colonial Penn’s Financial Ratings and Consumer Reviews
|Standard & Poor’s||BBB+|
Although most independent insurance agents represent many insurance companies that offer guaranteed acceptance life insurance, the agents will always try and place the client in a level benefit policy that provides first-day coverage and only offer the guaranteed acceptance policy if the applicant could not qualify for the level benefit policy.
What are the Benefits of Guaranteed Acceptance Insurance?
Although guaranteed acceptance life insurance is priced higher than traditional whole life insurance and has a waiting period of two or three years, like traditional whole life insurance, there are some benefits that we should talk about:
- Lifetime insurance protection – Your guaranteed acceptance whole life policy is cannot be canceled for any reason except non-payment of premium.
- Lifetime Level Premiums – Once your guaranteed acceptance policy is issued, the premiums will remain the same and cannot be increased by the company. Even if you are diagnosed with a terminal illness or have to live in a nursing home, your company cannot increase your insurance rates.
- Cash Value – Just as a traditional whole life insurance policy builds cash value over time, so will your guaranteed acceptance policy and you can access that money using policy loans or withdrawals.
What are Customers Saying about Colonial Penn?
No insurance company is immune to consumer complaints, especially since you can go online and voice an opinion about a service or claim issue. Since the information is out there, consumers should check out their company BEFORE buying a policy rather than after.
It’s important to note, however, that one of the first things a terminated employee might do is go online and write a bogus complaint about their former employer. For this reason, it’s probably a good idea to ignore complaints that you find hard to believe.
The Better Business Bureau is one of the better places to look for complaints because in most cases, they will list the response from the company.
We found that Colonial Penn had 82 complaints listed on their BBB page and the majority of them were about problems with a product or service. Considering the number of policies Colonial Penn has likely sold over the years, 82 complaints do not seem to be out of the ordinary.
It’s problem never a good idea to purchase life insurance without guidance from an experienced and reputable agent. Independent insurance agents represent multiple insurance companies that have multiple insurance products so it’s more likely that you’ll get more value for your dollar. Insurance agents do not charge a fee for the service they provide since they are paid directly by the insurer. Most agents will attempt to develop a long-term relationship with their clients and will stay in touch to help you make necessary changes to your insurance coverage to accommodate life events that typically happen to everyone.