AARP’s life insurance program, which is administered by New York Life, is a popular choice for many people in the United States. However, it is important to note that AARP’s life insurance offerings are somewhat limited compared to other insurance providers. As a result, it may be possible to find a similar or better life insurance product at a lower price when shopping around.
But before delving into the details, let’s first examine why AARP’s life insurance program is a popular choice and why it’s worth considering when selecting the best life insurance policy for your needs.
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Formerly known as the “American Association of Retired Persons,” AARP is a well-known organization that has become a recognized name in the life insurance industry, particularly in the realm of funeral insurance. However, it is important to note that AARP is not an insurance provider itself.
Rather, AARP is an interest group that boasts over 38 million members and has enough marketing power to negotiate partnerships with businesses in a variety of industries, including the insurance sector.
In the past, AARP membership was exclusively available to individuals aged 50 or older, but now it is open to any adult willing to pay the monthly membership fee and take advantage of the benefits that come with it, including access to AARP-branded life insurance.
New York Life underwrites life insurance policies sold under the AARP brand, leveraging AARP’s reputation and extensive membership among older individuals. New York Life compensates AARP for the right to market insurance under the AARP name and for AARP’s help in promoting the offered insurance.
While AARP policies do require membership in the organization, premiums are often more affordable compared to policies purchased directly from New York Life.
New York Life, the underwriter of AARP-branded life insurance, is a long-standing mutual insurance company with a solid reputation for financial stability. AM Best, a well-known rating agency, has given New York Life a rating of A++, placing it among the highest-rated insurance companies in the United States.
Below, we have listed NY Life/AARP’s ratings from some of the most respected agencies;
- A.M. Best – A++
- SP – AA+
- Moodys – Aaa
- Fitch – AAA
- Comdex ranking – 100
- BBB – B-
New York Life AARP is not accredited by the BBB. You can review the BBB complaints here.
AARP’s Final Expense Insurance Products
AARP’s final expense and burial insurance is offered through NY Life.
New York Life offers three different final expense insurance products under the AARP name:
Level Benefit Term Life, Simplified Issue Whole Life, and Guaranteed Issue Whole Life.
All three products are limited to AARP members over age 50.
The term and simplified issue policies are available in all fifty states, and AARP’s guaranteed issue policy can be purchased in all states but Washington and New Jersey.
While none of the three require a medical check-up at a doctor’s office, AARP’s screening is fairly strict—other than for the guaranteed issue whole life policy, which does not consider any health information.
The downside of AARP’s senior burial insurance policies is that the premiums for both products tend to be on the high side compared to similar policies issued by other insurers.
The term life policy has lower premiums but isn’t guaranteed for life.
Both Simplified Issue and Guaranteed Issue accrue cash value like most permanent policies.
Level Benefit Term does not accrue cash value.
AARP Level Benefit Term Life
AARP’s Level Benefit Term Life policy offers coverage in amounts ranging from $10,000 to $100,000 for members between ages 50 and 74 and spouses of eligible members between 45 and 74.
As term coverage, Level Benefit lapses at the expiration of a policy’s coverage period. Policies can be renewed for a (sometimes dramatically) higher premium up till age 80, at which point renewal is no longer an option and coverage completely expires.
Because Level Benefit Term Life cannot be renewed past age 80, it is not a reliable option for funeral and burial costs.
Most final expense policies are permanent life insurance products guaranteed to remain in place as long as premiums are paid.
With AARP’s term plan, you run the risk of outliving the policy and not receiving any actual death benefit.
Prior to an insured’s 80th birthday, term coverage can be converted to whole life. However, the age-based premiums will be much higher and the coverage amount lower than if a whole life policy had been purchased from the beginning.
For younger applicants in particular, the premiums for AARP’s term coverage are lower than most whole life final-expense policies.
Compared to similar term life insurance rates from other companies, though, AARP rates are nothing special.
An insurer offering term coverage can afford to charge lower premiums because there is a good chance it will never have to pay out any death benefit.
And with AARP, every five years, as the insured gets older and the statistical risk of death rises, the premiums increase—sometimes dramatically.
The application process for AARP Level Benefit Term Life is fairly simple. An applicant must complete a brief health questionnaire, and the insurer will conduct a prescription background check.
Disqualifying conditions include heart problems, stroke, lung disease, diabetes, liver or kidney problems, and HIV/AIDS.
Likewise, applicants who have recently undergone long-term medical or nursing home care—or who have received recent treatment or diagnostic tests—will not be eligible for AARP’s term coverage.
Level Benefit Term Life does not have a waiting period, which means that coverage takes effect in the full amount immediately after a policy is issued. The benefit amount remains fixed throughout the duration of the policy, though the premiums will increase.
At first glance, AARP’s Level Benefit Term Life policy looks less expensive than most final expense policies, but it’s an apples-to-oranges comparison. The vast majority of final expense policies are whole life policies—they’re guaranteed to never lapse or increase premiums.
Most applicants for funeral insurance want to be absolutely certain than the insurance money will be available to pay for final expenses, regardless of how long the insured lives. A policy you can outlive, and which your surviving loved ones might potentially not benefit from, doesn’t provide that certainty.
AARP Simplified Issue Whole Life
Simplified issue is no medical exam life insurance.
The Simplified Issue Whole Life policy New York Life offers under the AARP brand provides permanent, simplified issue coverage from $5,000 to $50,000.
Applicants must be AARP members between ages 50 and 80 (or spouses 45-80).
Like most whole life policies, AARP’s Simplified Issue has fixed premiums and benefits, which means policyholders can keep the same coverage level for the same premium as long as the policy stays in place.
And a policy will not lapse or expire except for failure to pay premiums, so coverage is guaranteed regardless of how long the insured lives.
Simplified Issue policies are intended for applicants in relatively good health who want immediate coverage without undergoing a formal medical exam.
The application process includes a health questionnaire that screens for heart problems, stroke, lung disease, diabetes, liver or kidney problems, and HIV/AIDS. Applicants with any of those issues—or who have needed recent treatment or diagnostic tests within the last few months—will not qualify for coverage.
Although the general rule is that most applicants can qualify for final expense coverage, AARP’s Simplified Issue policy is an exception.
The underwriting standards are stricter than many comparable policies, so only applicants in genuinely good heath will be eligible.
However, the AARP policy is somewhat unique among simplified issue final expense policies in that it does not increase rates for tobacco users. As a result, AARP Simplified Issue can be an attractive option for smokers who are nonetheless in good health.
Simplified Issue Whole Life through AARP comes with immediate coverage, which means there is no waiting period before full death benefit amounts kick in.
For applicants who are able to qualify, AARP’s Simplified Issue can be a serviceable option for funeral insurance due to the immediate coverage, fixed premiums, and permanent nature of the policies.
Premiums are a little higher than average for comparable policies, but payment obligations cease if and when the insured reaches age 95. For insureds who live longer than that, the policy will remain in place in the full amount, but no additional premiums will be owed.
AARP Guaranteed Issue Whole Life
Like Simplified Issue, AARP’s Guaranteed Issue Whole Life coverage is designed to provide beneficiaries with cash to pay for funeral and burial expenses.
The most significant difference between the two is that Guaranteed Issue does not require any medical screening whatsoever.
AARP members age 50 through 85 (and spouses beginning at age 45) can obtain up to $25,000 in coverage without a medical exam or even filling out a medical questionnaire.
As with nearly every guaranteed issue policy, AARP’s version has higher premiums and lower available coverage amounts compared to similar policies that require medical screening.
And, perhaps more significantly, Guaranteed Issue comes with a mandatory two-year waiting period.
2 Year Graded Death Benefit
The way AARP’s waiting period works is that, if the insured dies during the two years after the policy is issued, the policy will not pay out the full death benefit. Instead, the named beneficiary will receive 125% of the premiums paid to date.
This means that, if the insured dies after only one or two premium payments, the payout won’t be nearly big enough to cover all final expenses.
An important caveat to the Guaranteed Issue waiting period involves accidental death. If the insured dies as the result of an accident (i.e., not “natural causes” or an illness), the full policy benefits will be paid out.
Waiting periods are standard fare in guaranteed issue (or “guaranteed acceptance”) policies. Life insurance companies do not write guaranteed issue policies without waiting periods in one form or another because the underwriting risk is simply too high without them.
Premium rates for AARP’s Guaranteed Issue Whole Life are determined based on the applicant’s sex, age when applying for coverage, and the coverage amount sought. All things being equal, younger and female insureds will pay lower premiums, and older male insureds will pay higher premiums.
For a $20,000 whole life policy, rates run from as little as $74.00 per month for a 50-year-old woman to as much as $210 per month for an 80-year-old man. Compare that to the rates of a $25,000 whole life insurance policy of a competitor.
For insured’s who reach age 95, premium obligations end. The policy remains in place, but no additional premiums are required.
Great Option for those with Pre-Existing Conditions
For applicants whose health status is disqualifying for medically screened policies, particularly smokers, AARP’s Guaranteed Issue Whole Life is a reasonably good option for final expense insurance but don’t be afraid to shop around.
Noteworthy Life Insurance Riders
AARP whole life policies have optional riders which increase a policy’s premium payments but can be a good value for applicants who end up benefitting from them.
Under the “Waiver of Premium” rider, if the insured needs long-term nursing home care while the policy is in place, the insurer will waive the policyholder’s premium obligations during the insured’s stay in the nursing home.
And the “Accelerated Death Benefit” rider allows the policyholder to access up to half of the policy’s death benefit if the insured is diagnosed with a terminal illness (defined as a diagnosis of less than twelve months to live). This rider can convert a life insurance policy into a ready source of funds to pay for expensive end-of-life care.
While AARP’s life insurance program may offer many benefits and advantages, it is important to remember that it may not necessarily be the best option for everyone. It’s always a good idea to shop around and compare different policies and providers to ensure that you are getting the best coverage at the most competitive price.
While AARP’s program may offer affordable premiums and benefits that are tailored to the needs of older individuals, it may not be the most cost-effective or comprehensive choice for younger or healthier individuals. Furthermore, some individuals may prefer a policy that offers more customization or flexibility, which may not be available under AARP’s program.
By shopping around, you can compare various policies and providers, including AARP, to find the best fit for your unique needs and circumstances. You can also assess the financial strength and stability of different insurance companies and read customer reviews to get a better sense of what to expect.
In summary, while AARP’s life insurance program may be a great option for some, it’s important to explore all available options before making a final decision. Taking the time to shop around and compare policies can help you find the right coverage and provider to meet your needs and budget.