Colonial Penn is a popular company when it comes to burial insurance and final expense insurance.
But many people ask
“Is Colonial Penn burial insurance is any good?”
In the following Colonial Penn review, we will discuss the different products offered, how much you can expect to pay, as well as potential alternatives if it turns out Colonial Penn is not the ideal company for you, based on your needs, goals, and budget.
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Review of Colonial Penn
There are quite a few options available when considering different final expense life insurance companies.
To knowledgeably choose between the available products you need to know what’s out there and understand the strengths and weaknesses of the various policies and companies.
What is Final Expense Insurance?
Final expense insurance—also called “funeral insurance” or “burial insurance”— is senior whole life insurance coverage intended to provide a source of cash to cover the high costs related to memorial services and disposition of a decedent’s final remains.
Larger policies are also a good source of funds to pay estate debts and taxes, administrative fees, and similar transaction costs incurred during the estate administration process.
By guarantying cash will be available, final expense insurance avoids a situation in which grieving loved ones are forced to incur a big financial obligation—or the estate’s executor has to sell non-liquid assets at a loss to pay burial and funeral bills.
Cash Value Whole Life Insurance
Final expense insurance is almost always permanent whole life insurance, with fixed premiums and coverage that never lapses as long as premiums are paid.
Eligibility is generally limited to older applicants, and available coverage levels are usually smaller $25,000 whole life insurance policies, or less.
The application process is easier, and underwriting standards less strict, compared to most other life insurance products—making burial insurance a good option for seniors who might otherwise struggle to qualify for affordable life insurance coverage.
About Colonial Penn:
Colonial Penn Life Insurance Company is a Pennsylvania-based life insurer that focuses on final expense policies with relatively low coverage amounts and limited underwriting requirements.
Colonial Penn was founded in 1967 by one of AARP’s co-founders, Leonard Davis, and has an A- (or “Excellent”) rating from A.M. Best, which means Colonial Penn is financially secure, though not quite as strong as some of the older giants in the life insurance industry.
Colonial Penn may be best known for its paid celebrity spokespersons, who have included NFL greats Joe Theissmann and Roger Staubach, former Johnny Carson sidekick Ed McMahon, and the current face of the company, Jeopardy host Alex Trebek.
Colonial Penn’s rankings from consumer organizations are pretty average, to subpar. The BBB gives Colonial Penn an A+ rating but there are 79 consumer complaints. The good news is the company is active in addressing the complaints on the BBB website.
NAIC Company Complaint Index Rating for Colonial Penn
Colonial Penn rates slightly higher than its competitors with a NAIC company complaint index rating of 1.31.
Let’s take a moment and discuss the different products offered by Colonial Penn.
Colonial Penn Guaranteed Acceptance Whole Life
Guaranteed Acceptance Whole Life is Colonial Penn’s flagship policy. It’s the policy they issue the most and is the focus of the majority of the company’s advertisements.
The policy provides guaranteed-issue whole life insurance coverage with fixed premiums and death benefits that stay in place for the insured’s lifetime (as long as premiums are paid).
Available coverage amounts vary based on the applicant’s age and gender and are generally low.
Coverage levels won’t be suitable for applicants who want life insurance as a source of income replacement, but, for final expense insurance, benefit levels are usually adequate.
Guaranteed Acceptance Whole Life has a simple application process that doesn’t involve a health physical or any medical questions. As long as an applicant is within the policy’s covered age range (50-85) and doesn’t live in the State of New York, the application will not be rejected.
Colonial Life Guaranteed Acceptance Life Insurance Rates
Colonial Penn has a unique system for measuring coverage amounts for its Guaranteed Acceptance policies.
Most life insurance companies offer different levels of coverage and then base the premium rates for each coverage level on the insured’s age, sex, and medical history (except medical history is not considered for guaranteed acceptance policies).
The available coverage limits stay the same, and the premiums are adjusted between applicants. That method is the norm in the industry and what Colonial Penn uses for its Renewable Term and Permanent Whole Life products.
Cost Per Unit
For Guaranteed Acceptance policies, though, Colonial Penn’s approach is to sell coverage by the “unit,” adjusting the amount of coverage per unit according to the applicant’s age and sex.
So, the premium price per unit stays consistent between applicants, but the benefit level per unit is adjusted.
Units of Guaranteed Acceptance policies cost $9.95 per month each, and applicants can purchase up to 12 units.
Now, most Colonial Penn reviews will state that you can only get 8 units. However, using Colonial Penn’s Quoter, the company offers up to 12 units for its Guaranteed Acceptance Whole Life Insurance.
We also double checked with a Colonial Penn representative who affirmed that you can get up to 12 units of coverage.
So if you qualify based on your age, everyone can get up to 12 units, with each unit costing $9.95 a month. 12 units multiplied by $9.95 equals a total price tag of $119.40.
For example, a 50 year old male wanting 12 units of coverage would qualify for $21,432 worth of life insurance.
However, a 60 year old male wanting 12 units of coverage would qualify for $14,568 worth of life insurance.
Further, a 70 year old male wanting 12 units of coverage would qualify for $8,604 worth of life insurance.
Finally, an 80 year old male wanting 12 units of coverage would qualify for $5,112 worth of life insurance.
You can compare this to what other burial insurance companies offer $25,000 whole life policies and $10,000 whole life insurance policies for. In most instances you will find that a lower cost options exists vs Colonial Penn.
Making Sense of Colonial Penn’s Pricing
Ultimately, what this means is that a 50-year-old male and an 80-year-old male could each purchase 12 units of coverage for the exact same premium ($119.40), but the 50-year-old male would receive a much higher coverage amount per unit.
The effect of this model is that the maximum whole life insurance coverage limits available from Colonial Penn vary considerably by applicant.
Younger applicants can purchase more coverage, and older applicants are limited to a few thousand dollars.
There’s a lot of flexibility in deciding how much you will spend on premiums because you have eight different levels to choose from.
But, particularly for older applicants, you may not be able to get as much coverage as you would like, even if you are willing to pay higher premiums.
Twelve units is the maximum across the board.
Colonial Penn Permanent Whole Life Insurance
Another option from Colonial Penn for permanent life insurance suited to funeral and burial costs is the company’s Permanent Whole Life Insurance product.
Colonial Penn’s Permanent Whole Life is what is known as “simplified issue.” Simplified issue is another way of saying life insurance with no medical exam.
The application process requires written health screening but no physical examination, and coverage can be declined for applicants with existing health problems.
Permanent Whole Life from Colonial Penn is available to applicants between ages 40 and 75 in every state but New York.
Available coverage limits range from $10,000 – $50.000, which is a fairly typical range for final expense insurance. Unlike the guaranteed acceptance policy, Permanent Whole Life does not require a waiting period.
Both of Colonial Penn’s whole life offerings—Guaranteed Acceptance and Permanent Whole Life—accrue cash value after a policy has been in place for a year.
The value builds up the longer the policy is in place and can be borrowed against as an emergency cash source.
Policy loans accrue interest at eight percent (a pretty high rate for a loan against life insurance), and any loan balance outstanding at the time of the insured’s death will be deducted from the death benefit.
Colonial Penn Renewable Term Life Insurance
Colonial Penn’s third final-expense life insurance option, Renewable Term Life Insurance, provides up to $50,000 in term coverage for eligible applicants from ages 18 to 75 in every state but New York and Montana.
In general, term life insurance has lower starting premiums when compared to whole life policies with comparable coverage levels. But term coverage does not have long-term fixed premiums, is not guaranteed to stay in force for the insured’s entire life, and does not accrue cash value.
The $50,000 maximum coverage level offered by Colonial Penn is low by term life standards.
Colonial Penn’s term coverage is guaranteed renewable through age 90, which is notably higher than most term policies.
However, be aware that life insurance premiums increase every five years, sometimes dramatically.
And, by the time insureds reach their 80s, premiums cost much more than a whole life policy purchased earlier in life and are no longer affordable for many policyholders.
If an insured lives past age 90, the term coverage lapses altogether, at which point the premiums are gone and the insured no longer has life insurance coverage.
If the objective is to provide a source of cash for final expenses, a term policy is not certain to do that.
Applying for Colonial Penn Final Expense Life Insurance:
Colonial Penn requires applicants for its Permanent Whole Life and Renewable Term final expense insurance options to complete a health questionnaire but does not require a physical exam.
The company will also run a prescription history report and, in some cases, require a telephone interview with the applicant.
Colonial Penn has somewhat strict underwriting standards for its medically screened policies, including a long list of disqualifying medical conditions. Among many other things, an applicant who has recently been hospitalized, uses a wheelchair or oxygen, has diabetes or most other significant conditions, or has bipolar disorder will not be eligible for Colonial Penn’s screened policies.
The underwriting process for every life insurance company is a little different, and not all insurers screen for the same conditions.
At least some of the circumstances that would be disqualifying when applying for Permanent Whole Life or Renewable Term policies from Colonial Penn could be accepted by one or more other top life insurance companies.
Colonial Penn’s Guaranteed Acceptance product does not require any medical screening.
Like pretty much any other guaranteed acceptance life insurance policy you will ever come across, Colonial Penn’s guaranteed acceptance policy has a mandatory two-year waiting period.
Colonial Penn’s Waiting Period:
The Renewable Term and Permanent Whole Life Insurance policies offered by Colonial Penn are both “immediate issue life insurance” (or “immediate coverage”) policies, which means that the full benefit amounts become effective as soon as the policy is issued.
Guaranteed Acceptance, though, requires a two-year waiting period, referred to by Colonial Penn as the “limited benefit period.”
If the insured dies during the “limited benefit period” after the policy is issued, the full policy benefits will not be paid to the named beneficiary.
Instead, Colonial Penn will refund all premiums paid to date, plus seven percent interest. The seven percent interest on returned premiums paid by Colonial Penn is on the low side compared to other insurers that offer guaranteed acceptance funeral insurance.
Notably, though, the waiting period is inapplicable (and therefore the full policy limits will be paid out) if the insured dies during the “limited benefit period,” but the death results from a bona fide accident.
Deaths resulting from illness, suicide, healthcare treatment, voluntary ingestion of poison, or act of war do not qualify as “accidental.”
Colonial Penn Final Expense Insurance Premiums
As with most final expense carriers, Colonial Penn primarily bases premium rates on the applicant’s gender, age at the time of application, and desired benefit level. Younger female applicants receive the lowest rates.
Many of Colonial Penn’s marketing materials emphasize that premiums for its whole life policies are locked in place for life.
Fixed premiums are a good thing, but they are also standard for whole life coverage in general. Permanent life insurance policies that have flexible premiums are the exception in the industry.
As noted previously, Colonial Penn’s Renewable Term policy, like just about any other term policy that can be renewed, does not have fixed premiums.
As the insured gets older, the premiums will increase. When the insured closes in on his or her life expectancy, the increase is dramatic.
Another rule of thumb in whole life insurance is that guaranteed acceptance coverage is almost always more expensive than a comparable policy with medical underwriting (because the insurer has to assume the applicant is in worse health than average).
Thus, an applicant who can qualify for a health-screened policy will usually get better life insurance rates than with comparable guaranteed issue coverage.
The purpose of guaranteed acceptance policies is to provide access to final expense life insurance to individuals who might not otherwise be able to qualify.
Guaranteed Acceptance is Colonial Penn’s specialty. Compared to other companies offering guaranteed whole life policies, Colonial Penn’s rates range from average to above-average in cost.
Colonial Penn allows its policyholders some flexibility in how they choose to pay premiums. Payments can be made monthly, quarterly, semi-annually or annually.
In most cases, the company offers a noteworthy discount—measured as the cost of one month’s premium—for policyholders who elect to make annual payments.
Colonial Penn offers their life insurance products online. If you are interested in comparing Colonial Penn with one of the many companies we represent, please give us a call today and we will take time to explain the many different options available to you.
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