If you’re over 50, chances are that you are relatively familiar with the American Association of Retired Persons, otherwise known as AARP. This organization is massive in the United States, with a membership of roughly 38 million individuals.
Because AARP is designed to help retirees, it offers various products and services to help those close to or in retirement. One of those offerings is life insurance. While AARP does have a stellar reputation, it’s always a smart idea to take a closer look at any product before buying, particularly when talking about life insurance.
If you’re interested in buying a policy to protect your loved ones financially when you’re gone, you will want to compare many different companies’ rates and options. This review will break down the various plans offered by AARP and whether they might work for you.
These days, it seems logical that retirees would be able to enjoy their golden years after decades of employment. However, for many years, this lifestyle was not a guarantee, and many individuals over 65 would struggle, particularly when trying to find health insurance.
In 1947, Dr. Ethel Percy Andrus founded the National Retired Teachers Association (NRTA). The goal of the organization was to help retired teachers stay productive and active during retirement. One of the primary issues that this group was having was obtaining health insurance, as almost all companies would refuse to cover such a risky population.
By 1958, Andrus realized that the challenges faced by teachers were affecting all retirees, so she turned the NRTA into the AARP. By then, she managed to find an insurance company that was willing to cover elderly individuals, making it easier for them to stay healthy. It wasn’t until 1965 that the government created Medicare, which made healthcare even more accessible.
Since then, AARP has become a premier resource for retirees. The organization offers many different products and information about retirement, and membership within the AARP comes with tons of perks. One of those products is burial insurance.
However, because AARP is not an insurance carrier, the plans it offers are underwritten by the New York Life Insurance Company (check out our review of New York Life here). AARP acts as a promotional organization that helps sell policies from New York Life. So, before reviewing the individual plans, let’s take a closer look at the company behind them.
New York Life Company Background
One way to be sure that an insurance company is reputable is to see how long it has been in business. Fortunately, New York Life has been underwriting policies since 1845, making it one of the oldest operating companies in the United States.
While some insurers exclude specific states (usually, for regulatory reasons), New York Life operates everywhere in the country. It also has a presence in other countries worldwide, where it offers life insurance and other policies.
Another point to consider is a business’s credit rating. This rating illustrates how well it can fulfill its liabilities. Currently, New York Life has the highest score across multiple agencies, including a AAA from Fitch Ratings, an A++ from A.M. Best, and an AA+ from Standard and Poor.
Overall, you can feel confident about purchasing a life insurance policy from New York Life. However, because you are buying your plan through AARP, you have more limited options than if you were working with New York Life directly.
Burial Insurance Policies Offered by AARP/New York Life
There are three specific policies that can be considered “burial insurance” provided by AARP. They are Level Benefit Term Insurance, Simplified Issue Whole Life Insurance, and Guaranteed Life Insurance.
Here is a breakdown of each plan and what it offers.
Level Benefit Term Life Insurance
When shopping for life insurance, there are two primary options: term insurance and whole life insurance. Term plans will cover you for a specific period – afterward, they expire, and your benefits are no longer valid.
This plan from AARP works the same way, except you don’t choose the term’s length. Typically, you can pick plans between 10 to 30 years, but this policy will expire once you turn 80, regardless of when you purchased it. So, if you bought the insurance at age 50, it would cover you for 30 years.
This plan is available for individuals between 50 and 74 and can extend to their spouses, between 45 and 74. If you are over 74, you can’t purchase this insurance. You can choose between $10,000 and $100,000 of coverage, but your age and health will be deciding factors when determining your maximum death benefit.
Usually, when buying term insurance, your rates are locked in for the duration of the plan. Unfortunately, with AARP, you don’t have that option. Instead, your monthly premiums will increase every five years until the policy expires. The longer you have coverage, the more you will wind up paying overall. Here is an example rate plan for a $50,000 policy:
- Age 50-54 – $51.04
- 55-59 – $74.58
- 60-64 – $108.25
- 65-69 – $143.96
- 70-74 – $207.25
As you can see, your premiums will increase significantly as you get closer to the expiration date. Considering that other term insurance plans will remain the same throughout the period, this sliding scale is much pricier. On top of these payments, you also have to maintain your AARP membership, which is another monthly fee.
By comparison, if you were to purchase 30-year term life insurance at age 50 with a level premium rate of $51.04, you could save thousands of dollars over the same period.
That being said, this plan from AARP does not require a medical exam. Instead, you simply have to answer a few questions about your health. As long as you don’t have any significant health problems (i.e., stroke, cancer, lung disease etc.), you will be accepted.
Overall, when compared to other term life insurance policies, this one is not beneficial for most individuals. Considering that we’re discussing burial insurance, the fact that it expires at age 80 means that it likely won’t work well for your situation. You can roll the plan into permanent coverage, but it would be much better to start with whole life insurance from the beginning.
Simplified Issue Whole Life Insurance
Although AARP offers this plan, the organization does not promote it as much as it does the term insurance policy. You will have to ask an agent for this option to get rates and details. Usually, AARP wants customers to buy term life insurance because it is a more significant moneymaker for the organization.
By comparison, this policy is far better for several reasons:
- Your rates will not increase as you get older. Once you purchase a plan, your monthly payments are locked in. It is rather bizarre that AARP insurance works this way because most companies will do the opposite, meaning that rates go up on whole life insurance but stay the same for term policies.
- There are no unique premiums for smokers – everyone pays the same amount. If you are a smoker and looking for affordable insurance, this option will likely be much better than you could find with a different company.
- Once you are approved, your coverage begins immediately. There can be a two-year waiting period with other burial insurance options, depending on your current age and health.
Although these benefits are an improvement over AARP’s term insurance, there is one significant drawback – many individuals will get declined for this policy.
The reason for such a high denial rate is that AARP has many “knockout” questions. These questions are related to your health conditions, and if you answer yes to any one of them, you are “knocked out” of the approval process. These issues include:
- Lung Disease
- Heart Conditions
- Liver or Kidney Disease
- Immune System Disorders
- Asthma and Bronchitis
And the list goes on. Considering that many individuals over 50 will have at least one of these conditions in their medical history, the chances of getting approved are relatively low. However, if you do qualify, you can choose a death benefit between $5,000 to $50,000. Here is a quick breakdown of rates by men and women.
Male Rates for a $10,000 Plan
- Age: 50 – Cost: $33/month
- 55 – Cost: $41/month
- 60 – Cost: $48/month
- 65 – Cost: $61/month.
- 70 – Cost: $79/month
- 75 – Cost: $98/month
- 80 – Cost: $123/month
Female Rates for a $10,000 Plan
- Age: 50 – Cost: $25/month
- 55 – Cost: $30/month
- 60 – Cost: $37/month
- 65 – Cost: $47/month
- 70 – Cost: $63/month
- 75 – Cost: $81/month
- 80 – Cost: $100/month
Male Rates for a $25,000 Plan
- Age: 50 – Cost: $79/month
- 55 – Cost: $100/month
- 60 – Cost: $118/month
- 65 – Cost: $150/month
- 70 – Cost: $195/month
- 75 – Cost: $242/month
- 80 – Cost: $306/month
Female Rates for a $25,000 Plan
- Age: 50 – Cost: $60/month
- 55 – Cost: $73/month
- 60 – Cost: $89/month
- 65 – Cost: $116/month
- 70 – Cost: $155/month
- 75 – Cost: $201/month
- 80 – Cost: $248/month
Overall, these rates are phenomenal if you are a smoker, but if you’re in excellent health, you can save money by choosing a plan with a different company.
Guaranteed Life Insurance
Because most individuals won’t qualify for the simplified issue whole life insurance policy, there is an option for guaranteed acceptance coverage. As a rule, whenever life insurance is guaranteed, it will be more expensive than other plans, and there will be a two-year waiting period.
Because of these setbacks, we usually recommend this kind of insurance only if you will get declined otherwise. For example, if you have one of the “knockout” conditions listed for the simplified plan, or you have other high-risk factors.
Overall, this coverage is similar to AARP’s simplified issue whole life insurance, and the rates are comparable. You will pay more with this plan, but once you reach age 75+, the premiums don’t increase much, so you will actually pay around the same amount or less. Again, there is no difference for smokers, so you will pay a lot less than you would with another company if you smoke.
If you die within the first two years, this plan will pay 125 percent of your premiums to your beneficiaries. In most other cases, insurance companies will only pay 110 percent, so this option is slightly better.
Finally, because the insurance is guaranteed, you don’t have to worry about any knockout questions. Regardless of your age or health conditions, you can qualify for coverage.
Pros and Cons of Buying Burial Insurance Through AARP
For the most part, there are few reasons to purchase a burial insurance policy through AARP. Here is a quick overview of these plans’ benefits and disadvantages compared to other burial insurance options out there.
Pros of AARP Burial Insurance
- Easy to qualify for term life insurance
- Excellent rates for smokers who qualify
- No rate increases for whole life insurance
- Policies are backed by a highly reputable company, New York Life
Cons of AARP Burial Insurance
- Term rates increase as you get older
- It isn’t easy to qualify for non-guaranteed whole life insurance
- You have to be an active AARP member to access these plans
- Non-smoker premiums are higher than other policies offered by different insurance companies
Unless you have a particular affinity for AARP, we believe that you can find better rates and coverage options elsewhere. However, if you are a smoker in excellent health, you might appreciate the rates offered by AARP if you do qualify. Even if you have to go with guaranteed life insurance, it might be more affordable.
Contact NextGen Life Insurance Today
The best way to ensure that you have the right coverage for your needs is to compare rates and policies from as many companies as possible. At NextGen Life Insurance, we’ll do all the legwork for you so that you can spend more time focused on what matters most. Contact us today to see how we can help you.