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AARP Final Expense Life Insurance Review [Are They The Best Option for You?]

review of AARP life insurance program

AARP’s life insurance program is administered by New York Life, one of the best life insurance companies in the U.S.

However, AARP’s offerings are limited, and often you can find a similar product for less when shopping for life insurance.

About AARP

AARP life insuranceOnce known as the “American Association of Retired Persons,” the organization now formally called just “AARP” is one of most recognized names in life insurance generally and funeral insurance specifically.  However, AARP itself is not actually an insurer.

Instead, AARP is an interest group with over 38 million members and enough marketing clout to negotiate partnerships with businesses in dozens of different industries, including (or perhaps especially) insurance.

AARP membership was historically limited to individuals at least fifty years old, but that’s no longer the case.

Membership in AARP, and all the benefits it entails (including eligibility for AARP branded life insurance), is now available to any adult willing to pay the monthly membership fee.

AARP life insurance programLife insurance purchased through AARP is underwritten by New York Life.

Because of AARP’s reputation and extensive membership among older individuals, New York Life compensates AARP for the right to market life insurance under the AARP brand and for AARP’s assistance in promoting the offered insurance.

AARP policies require membership in the organization, but policy premiums are a little lower than what you would get with a policy purchased directly from New York Life.

The underwriter of AARP-branded life insurance, New York Life, is a longstanding mutual insurance company with an excellent reputation for financial stability.  AM Best grades New York Life as A++, which places NY Life as one of the top rated life insuA.rance companies in the U.S.

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.

Convertible

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.

Application Process

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.

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