In the following AARP life insurance review we will cover the pros and cons to choosing the American Association of Retired Persons as your insurance provider. Many people choose AARP because of its strong name recognition and marketing expertise. But is there a better option out there?
Review of AARP Life Insurance
About AARP Life Insurance
History – Previously known as the American Association of Retired Persons, AARP has a long history of helping those aged 50 and above. Right across the country, their many policies have assisted people before, during, and after retirement to leave something behind for loved ones after death.
Founded in 1958, AARP has a motto of ‘Real Possibilities’ and they now boast a workforce of nearly 2,000 while also working with 17,500 volunteers. Despite these impressive numbers, the most common question that comes up with the company is ‘are they a life insurance company?’. In truth, the answer to this is actually ‘no’ because they are essentially a marketing company that auctions off their brand image. Currently, NY Life holds the rights and therefore has their products on show.
Finances – With the existing rules in place, policyholders are required to also be members of AARP and this membership count is currently thought to be at around 38 million. With this in mind, there is now billions of dollars of insurance in force and this has allowed them to build a solid reputation and achieve some impressive ratings as we will see below.
When assessing life insurance companies, it is always advantageous to look into the official ratings because this shows how well regarded they are in the industry. Furthermore, it can show the quality of their customer service and many other factors. Below, we have listed NY Life/AARP’s ratings from some of the most respected agencies;
- M. Best – A++
- SP – AA+
- Moodys – Aaa
- Fitch – AAA
- Comdex – 100
- BBB – B-
As you can see, all ratings relating to finance are particularly impressive. Whether it is A.M. Best or Comdex, these are some of the highest scores you will see which means that you will remain protected by AARP and NY Life. Even with trouble in the economy, they should have enough in place to make it through successfully while caring for any policy you have in place.
For customer service, the B- rating from the Better Business Bureau is a little misleading. Sure, you might expect a huge company like this to score in the 90s so there is definite room for improvement but this score is still equivalent to between 80 and 84 out of 100. Although not the best, this isn’t the worst you will find.
As mentioned previously, AARP can be described as a marketing company where NY Life currently holds the rights to use the name and brand image for life insurance.
Since AARP has a membership of 38 million, there are now numerous products in place including discounts for prescriptions, dental insurance, opportunities to earn points for Walgreens, identity protection, investment services (TD Ameritrade), auto insurance (The Hartford), home insurance (The Hartford), pet insurance, roadside assistance, car rental discounts, and much more.
In each niche, they are working with the highest bidder which means that The Hartford currently has the right to both auto and home insurance while TD Ameritrade provides the 38 million with investment advice. At some point in the future, these might change and a new highest bidder might take over so you can see how AARP now operates.
AARP Life Insurance
In total, there are three main products on offer through AARP; term life, permanent life, and guaranteed permanent life so let’s break these down into more detail. The good news about AARP is the company offers no medical exam life insurance on all its policies.
Term Life Insurance – term life insurance is available for all members between the ages of 50-74, you could obtain a death benefit of up to $100,000. If you’re worried about a medical examination, the good news is that AARP doesn’t require one but some simple health questions instead.
Initially, you will be offered a ‘level term’ premium but this is a little misleading because your payments will increase every five years.
Typically, 20 years is seen as standard with this form of insurance but there are also opportunities for ten years depending on your needs.
On the whole, there are a couple of positives to this insurance including the easy application, the lack of medical examination, and even the fact that you can qualify with small health problems.
However, there are also some major negatives including the fact you need to be a member to take advantage of the product, the expensive increasing premiums (can be 50% more!), and a low death benefit. If you have large debts or want to provide your family with a good amount of money after death, you may find $100,000 too little and some customers have even been limited to $50,000 causing even more problems.
Permanent Life Insurance – With permanent life insurance, your premiums will be locked down this time which means that your final premium payment will be the same as your very first. For a death benefit, you can choose an amount between $5,000 and $50,000 so you could argue the case that this policy is designed rather like a final expense policy.
Just like the term life insurance, there is no medical examination to consider but once again we can pinpoint the price of the policy as the biggest downfall. With the various guides and tips we provide, it won’t take you long to find a policy priced 25% below this one so it isn’t just a small difference either.
Furthermore, there isn’t too much flexibility with the policy itself and you don’t have too much choice. If you need a small amount to cover your final expenses and you aren’t worried about bells and whistles, you might find a use for this policy as it will last until death and the premiums remain the same.
Guaranteed Life Insurance – guaranteed issue life insurance is available to everyone within the correct age range since it is ‘guaranteed issue’; in short, this means there is no exam nor is there any questions regarding your health.
Designed as a final expense and funeral policy, you will typically find a two-year graded death benefit attached meaning the full death benefit will not be available from the very first day. Since the company knows nothing about your condition, they release the money in stages to protect their investment.
For the death benefit, amounts available include $15,000, $10,000, $5,000, and some even smaller. For final expenses, these are perfect amounts to cover debts, funeral expenses, travel costs, medical bills, and anything else that arises.
On the down side, we have to point you in the direction of prices one last time because they cannot be considered ‘competitive’. However, those happy to pay the higher premiums will benefit from a solid policy.