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The 2021 Truth About Colonial Penn-What to know before you buy

Founded: 1968
Based: Philadelphia, PA
Grades: AM BEST A-, S&P A-, Moody’s A3, Comdex score 63
Where to be careful: Over-priced plans & plans that have rate increases over time.

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Company Background
Guaranteed-Acceptance Whole Life
Whole Life
Term Insurance
Sample Rates
Summary

Company Background
Colonial Penn was started over 50 years ago by Leonard Davis who was also a Co-founder of AARP. The company focused on providing seniors with guaranteed-acceptance life insurance plans that could cover burial costs. Colonial has had several celebrity spokespersons over the years including Ed McMahon and Alex Trebek among others. Today the company is famous for offering coverage starting at just $9.95/month. But what do you really get with Colonial Penn and is it right for you? This review will cover these questions and what you must know before you buy a plan from Colonial Penn. As it is written in ancient scripts; know the truth and the truth will set you free! 

Guaranteed-Acceptance Insurance

  • Coverage Amounts: $418-$22,913 (Based off Units)
  • Ages: 50-85
  • Two-year waiting period
  • Level Premium
  • Lifetime Coverage

Guaranteed-acceptance life insurance means that the applicant can not be denied for coverage as long as they are within the age-range the that plan is offered to. So, if you are between ages 50-85 then Colonial Penn will not deny you coverage regardless of your health or health history.
How can Colonial Penn make such an offer? Because ALL guaranteed-acceptance plans have a waiting period before they fully pay-out. Colonial Penn, like nearly all guaranteed-acceptance plans, will not fully pay until the insured has owned the plan for a full two years. So, if the insured does die of natural causes in the first two years of owning the plan, then the insured’s beneficiary will receive the sum of all the money paid at that point, plus a 7% bonus. In some states this works a little bit differently for a death within the first two years, but across almost all of the US it is a return of all premiums paid plus a 7% bonus to the beneficiaries. If death occurs after two years of taking out the plan, the full death benefit would pay out. This is basically par-for-the course when it comes to guaranteed-acceptance life insurance plans, however Colonial Penn’s bonus of 7% is below the standard 10% offered by most other providers.

In truth however a senior should NOT be on a guaranteed-acceptance plan unless they have a serious health condition!  Most seniors can qualify for day-one full coverage but many don’t know it. So many seniors buy a guaranteed-acceptance plan that has a two-year delay, without realizing that they can qualify for better day 1 coverage with lower rates.

Now here comes the part that makes Colonial Penn’s guaranteed-acceptance plans  really confusing; they offer this coverage type in units. So, instead of saying the plan covers $20,000 or $10,000 for example, it is offered in units of coverage. So, you might be asking yourself, ‘what the flip is a unit?’ Colonial’s website describes a unit as: 

  • The life insurance benefit amount that you can purchase. It depends on age, gender, and state. 

Confused yet? If so, you are not alone. To put it more clearly; a unit is how much coverage you can buy for $9.95/month. This amount would be different for an 85-year-old male vs a 50-year-old female. So, the price/unit is the same across age, gender, and state, but the amount of coverage changes. Colonial offers these plans from 1-12 units of coverage.

Now, this unique setup makes it harder to compare Colonial Penn to other companies, since it really means you are comparing their price alongside the amount of coverage for that certain price. BUT this is your lucky day because here at Life Insurance for Seniors we are about to do just that! And you might be shocked when you see how Colonial stacks up! To check out how Colonial Penn compares with Mutual of Omaha keep reading or you can skip ahead here.
If you do think you need a guaranteed-acceptance plan due to a severe health impairment you can also see those rates in our independent review of Mutual of Omaha here. We do recommend that a senior chats with a licensed, independent agent before picking up a guaranteed-acceptance plan to verify that it is the best choice. 

Traditional Whole Life Coverage

  • Coverage amounts; $10k -$50k
  • Aged 40-75 
  • No waiting period, first day full coverage
  • Level coverage, level premium
  • Lifetime coverage

Colonial Penn also offers a traditional whole life plan that does have health questions and a prescription check in order to qualify. This plan is not as well-known as the guaranteed-acceptance plan, but it would be a better option for those that do qualify, however, the qualification requirements are fairly strict. For instance they will not accept:

  • Insulin-dependent diabetics
  • Seniors on blood thinners 
  • Any Stroke/TIA survivors 
  • Anyone diagnosed Bipolar, Schizophrenia, Multiple Sclerosis among others

For those that do qualify you can see rates here and compare again to Mutual of Omaha’s popular whole life plan. Again, you may be shocked to see how Colonial Penn compares! Colonial Penn’s whole life plans are not offered in units like their guaranteed-acceptance plans, so it’s much simpler.

Annual Renewable Term Insurance

  • Coverage Amounts; $10k -$50k
  • Ages: 18-75
  • Price increases every 5 years
  • Expires at age 90

Finally, Colonial also offers term insurance for those looking for a cheaper choice. Term insurance by definition, is designed for temporary coverage. Normally, term insurance is offered to parents with young children. This is not really appropriate for seniors looking to pay for final expenses such as burial or funeral costs. Colonial does, however, make the coverage last to age 90, whereas most term insurance normally expires after 10-30 years. 

BUT there is a big catch with this product; their term plan has a price bump every 5 years.  Over time this can make the coverage awfully expensive for someone on a fixed income and it would likely be dropped entirely eventually due to sheer expense. The vast majority of term insurance does not behave this way, but instead, has a price lock for 10, 20 or 30 years. Most term insurance starts at around $100,000. This unique term product also makes it harder to compare; however, below we show how Colonial Penn’s term rates compare with Sagicor Life’s 50,000 10yr term preferred rates. While we cannot make a direct comparison, since their product is unique, see below and make your own judgement on the Colonial Penn term rates. Just like Colonial Penn, Sagicor’s 10yr term below does not require a medical exam to qualify either .

Sample Monthly Rates 

Colonial Penn Guaranteed-Acceptance Coverage vs Mutual of Omaha Day 1 Whole Life

Male
Non Smoker
Colonial Penn
4units @$39.80
Mutual of Omaha
@$39.80
Same Price, MORE benefit 
w/Mutual of Omaha!
Age 85$1,672NASee here
Age 80$1,704$2,681$977
Age 75$2,240$3,782$1,542
Age 70$2,868$5,125$2,257
Age 65$3,728$6,869$3,141
Age 60$4,856$9,023$4,167
Age 55$6,024$11,177$5,153
Female
NonSmoker
Colonial Penn
4units @$39.80
Mutual of Omaha
@$39.80
Same Price, MORE benefit 
w/Mutual of Omaha!
Age 85$1,908$2,758$850
Age 80$2,480$3,843$1,363
Age 75$3,168$5,288$2,120
Age 70$4,l72$7,314$3,142
Age 65$5,332$9,680$4,348
Age 60$6,484$12,337$5,853
Age 55$7,536$14,936$7,400

Colonial Penn Traditional Whole Life vs Mutual of Omaha Day 1 Whole Life

Male
Non Smoker
Colonial
$10000
Mut of O.
$10000
Colonial
$20000
Mut of O.
$20000
Age 75$118.29$99.97$232.82$196.74
Age 70$87.46$74.61$171.18$146.01
Age 65$66.45$56.48$129.14$109.75
Age 60$51$43.76$98.25$84.32
Age 55$39.07$35.95$74.38$68.69
Female
Non Smoker
Colonial
$10000
Mut of O.
$10000
Colonial
$20000
Mut of O.
$20000
Age 75$94.07$67.78$184.39$141.62
Age 70$65.68$53.24$127.61$103.28
Age 65$47.43$41.01$91.11$78.82
Age 60$35.84$32.87$67.93$62.53
Age 55$27.42$27.71$51.08$52.21

Colonial Penn Term Insurance Rates vs Sagicor 10yr Term

Male
Non Smoker
Colonial
$20000
Colonial
$40000
$50,000 10yr
Sagicor Life
Age 75$108.75$215.99$136
Age 70$77.51$153.53$83
Age 65$56.95$112.40$51
Age 60$40.82$80.13$32
Age 55$31.48$61.46$23
Female
Non Smoker
Colonial
$20000
Colonial
$40000
$50,000 10yr
Sagicor Life
Age 75$72.21$142.93$84
Age 70$52.21$102.93$51
Age 65$38.83$76.16$29
Age 60$29.48$57.46$20
Age 55$23.48$45.46$17

Summary

In summary Colonial has three Life Insurance plans; 

  1. Guaranteed-acceptance
  2. Traditional whole life
  3. Renewable term

While the company is well-known and has been on the market for over 50yrs, their rates are not competitive when compared to other A Grade companies. The guaranteed-acceptance plans appear confusing due to being  offered in units and their term insurance has price increases every 5 years.  

In good conscience we cannot recommend Colonial Penn Life Insurance plans to a senior for these reasons. But Colonial has done a great job in one area; marketing these products. If you are a fan of their previous spokesperson Alex Trebek, you would be better off watching Jeopardy reruns. If you want a great life or burial insurance product, we recommend looking elsewhere.  

Final Grade: F

In closing, we highly recommend talking to an independent agent or at least shopping around when it comes to your life insurance & burial insurance. You can see your choices here or contact us to see what works best for you. We hope this article has helped you to understand more about Colonial Penn plans, rates, and your choices for the future. 

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