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The Truth About Colonial Penn & Their $9.95 Plan (2024 Review)

  Written by Leland Jeppesen

Last updated Nov 30, 2023

  Written by Leland Jeppesen

 

 

Last updated Nov 30, 2023

Colonial, one of the most well-known companies in world has one of the most well-kept secrets regarding their plans. Many who buy are uninformed of how their plans really work.

Key Points
Quick Hot TakeCompany background
$9.95 Guaranteed-Acceptance PlanTerm Insurance
Sample Rates

Quick Hot Take

If you were my own mother I would tell you to stay away from this company. Their $9.95 offer sounds so wonderful but is actually one of the worst in the insurance industry. Most seniors can get coverage without a waiting period and ALL seniors, yes ALL, can get far better choices than Colonial Penn from many life insurance companies.

Colonial thrives when seniors are unaware of what this review will quickly disclose. Below we will break down the actual numbers from Colonial. By the end of this review I am confident you will come to the same conclusion I have; stay away from Colonial Penn. I trust the facts will speak for themselves.

Company Background

Due to its endless television campaigns, Colonial Penn has become one of the most well-known insurance companies in the nation. Started over 50 years ago by Leonard Davis, a Co-Founder of AARP, the company focuses on marketing to the senior population.

Colonial’s big offer is its guaranteed-acceptance life insurance plans that have been promoted by celebrities like Ed McMahon and Alex Trebek. Their flagship offer is simple; just $9.95/month for burial or final expense insurance. On the face of it this seems like a great deal, but what do seniors really get from Colonial Penn at just $9.95? Is it a good plan?

The $9.95 Guaranteed-Acceptance Plan

  • Coverage Amounts: $418-$30,000 (Based off Units)
  • Ages: 50-85
  • Two-year waiting period
  • Level Premium
  • Lifetime Coverage

Guaranteed-acceptance life insurance means that a person would not be denied coverage as long as they are within the age-range that the plan is offered. So, if you are between ages 50-85 then Colonial Penn will not deny your application regardless of your health or health history.

There is no medical exam, no check on prescriptions, and no medical records required to be approved. How can Colonial Penn make such an offer? Because all guaranteed-acceptance plans have a waiting period before a death claim would fully pay-out.

So, even if you have cancer you can get covered. Colonial Penn, like nearly all guaranteed-acceptance plans, will not fully pay however unless the insured has owned the plan for two years.

So, if the insured does die of natural causes in the first two years of owning the plan, the insured’s beneficiary will receive the sum of all the money paid up to that point, plus a 7% bonus.

In some states this works a little bit differently, but across almost all of the USA the plan 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 how nearly all guaranteed-acceptance plans work, however, Colonial Penn’s 7% bonus is far below the industry standard of 10% offered by most other providers on a guaranteed-issue plan.

In truth however a senior should NOT be on a Guaranteed-Acceptance plan in the first place unless they have a serious health condition!  Most seniors can qualify for day-one full coverage but many don’t know it! Many seniors buy a guaranteed-acceptance plan that has a two-year delay, without realizing that they can actually qualify for day-1 full coverage at a lower rate! Colonial has no incentive to let you know this of course, so be sure to check what you can qualify for prior to buying any guaranteed-acceptance plan!

Confusing Pricing

Now here comes the part that makes Colonial Penn’s Guaranteed-Acceptance plans really confusing; they offer the benefit amount in units. So, instead of the plan offering $20,000 or $10,000 of coverage like nearly every other life insurance company, it is offered in units of coverage. At this point 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. 

Thank you Colonial. Confused yet? You are not alone. To put it more clearly; a unit is how much coverage you can buy for $9.95/month. But wait, this amount would be different for an 85-year-old male vs a 50-year-old female, etc. So, the price per unit is the same across age, gender, and state, but the amount of coverage changes. Colonial offers 1-12 units of coverage for this guaranteed-acceptance plan.

Well why would anybody do this? Well not totally sure but it does make it harder to compare Colonial Penn to any other provider. To do so you really need to geek out and compare Colonials’s amount of coverage for the $9.95 price vs other providers. Not easy, but lucky you; we geeked out for you:) And you might be shocked when you see how Colonial Penn compares versus strong competitors. I believe GI Joe said knowing is half the battle. Below, see how Colonial Penn compares with Mutual of Omaha for instance. Maybe knowing is 90% of the battle on this one!

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

Now if you really 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 Insurance Coverage

  • Coverage amounts; $10k -$50k
  • Aged 40-75 
  • No waiting period, day-1 full coverage
  • Level coverage, level premium
  • Lifetime coverage

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

  • Insulin-dependent diabetics
  • Seniors on blood thinners 
  • Any Stroke/TIA survivors 
  • Anyone diagnosed as being bipolar, schizophrenic, or having multiple sclerosis among many other conditions

For those that do qualify, you can see rates here and compare against Mutual of Omaha’s popular whole life plan Living Promise. Colonial Penn’s whole life plans are not offered in units like their guaranteed-acceptance plans, so it is much easier to compare.

Sample Monthly Rates

Colonial Penn Traditional Whole Life vs Mutual of Omaha(*MOO) 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

Annual Renewable Term Life 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 type of coverage is not 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. This is not at all normal compared to other life insurance companies. Over time this can make the coverage awfully expensive for someone on a fixed income and it would likely be dropped eventually due to rising rate over time. The vast majority of term life insurance policies do not behave this way, but instead, have a price lock for 10, 20 or 30 years.

Most term insurance starts at around $100,000. Colonial’s 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 has some quirks, you can see below and make your own judgment on the Colonial Penn term rates. Both Colonial Penn term plans and Sagicor’s 10yr term below do not require a medical exam.

Sample Monthly Rates

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

Complaints

Colonial Penn has received a high number of customer complaints in comparison with competitors. This is reported by the NAIC’s National Association of Insurance Commissioners. This service tracks customer complaints and utilizes these numbers to create a complaint index.

The index compares firms similar in size by the number of complaints filed. Insurance companies are allocated a number according to how many complaints they receive in a specific year. 1.0 represents the expected number, based upon their size. In 2022 Colonial Penn had a score of 2.98.

This means they had nearly 3 times as many complaints as another life insurance company of similar size!

 

Summary

In summary, Colonial has three plans; 

  1. Guaranteed-acceptance (also called guaranteed-issue insurance)
  2. Traditional whole life insurance
  3. Renewable term life insurance

While the company is well-known, the rates are not competitive when compared to other A-grade providers and their products are inferior. Their guaranteed-acceptance plans are confusing due to being offered in units and their term life insurance has price increases every 5 years.  

In good conscience we cannot recommend Colonial Penn Life Insurance plans to any senior for these reasons. Colonial has excelled in one key area however; marketing their products to uninformed seniors. 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, burial, or final expense insurance, we recommend looking elsewhere.  

Final Grade: F

In closing, we highly recommend talking to an independent agent or at least shopping the market when it comes to your life & burial insurance choices. You can see choices on this site 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 available choices.

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