Colonial Penn Life Insurance Review

Since its inception, Colonial Penn has been all about providing life insurance to older individuals. As TV host and Colonial Penn paid endorser Alex Trebek promises in their commercials, “Your rate can never go up for any reason”.

If you’re familiar with life insurance products, you know that most companies offer lock-in rate options on some of their products. So, what makes Colonial Penn different? Can you really get life insurance coverage protection for only $9.95 a month as they promise in their ads?

In this review, we’ll cover everything you need to know about Colonial Penn. How they started, how financial agencies rate them, what life insurance products they offer, the pros and cons, and our recommendation.

History of Colonial Penn

Based in Philadelphia, Colonial Penn was founded by Leonard Davis, who also co-founded the American Association of Retired Persons or AARP. It is said that Colonial Penn is actually the basis of AARP, which was built to provide life insurance to people aged 65 and above.

Colonial Penn Life Insurance Review

In 1985, Colonial Penn was acquired by FPL Group, a utility holding company. Six years later, FPL sold the company to Leucadia National, a US-based American financial services company.

Another six years pass and Colonial Penn gets sold to another company, Conseco Inc (now known as CNO Financial) who renames the life insurance company into Conseco Direct Life. Just a few years later, however, the name gets changed back to Colonial Penn.

Today they are known for their no-medical-exam life insurance products that are tailored for older folks. Alex Trebek (of Jeopardy! fame) is their main paid endorser.

Colonial Penn Financial Strength

Colonial Penn gets decent scores from the most popular financial rating agencies but still falls behind the scores of other life insurance companies we have reviewed, like Protective or Principal Life.

A.M. Best: A- (Excellent)

Standard & Poor: BBB+

Fitch: BBB+

Colonial Penn Life Insurance Products

Colonial Penn doesn’t have an assortment of life insurance products like bigger and more popular life insurance companies. Instead, they only have three and all of them feature locked-in premium rates and no-medical exam.

Renewable Term Life Insurance

Unlike traditional term life insurance offerings from its competitors, Colonial Penn’s term life product does not have a leveled premium. To the unfamiliar, it simply means that your rates will change each time you hit a new age “band”.

For example, say you’re in a 5-year band and get approved for a term policy priced at $40 per month at age 50. This means that you’ll pay $40 per month until you reach 55—and then you have the option to renew your policy for another band but with an increased premium rate. This is renewable until age 90.

Colonial Penn Life Insurance Review

Permanent Whole Life Insurance

This is offered to customers aged between 40-75. Coverage is available at increments of $50,000 and like other permanent life insurance, it has cash value. Similar features like no medical exam and locked-in premium rates are offered as well, along with their flexible payment options.

Colonial Penn Life Insurance Review

Guaranteed Acceptance Life Insurance

Available for customers aged between 50 and 85, this is Colonial Penn’s flagship offering and it works similarly with Final Expense Insurance products from other insurance companies.

So what makes it different? If you’ve seen their commercials, Alex Trebek can be seen touting Colonial Penn’s claim of “Coverage starts at $9.95 a month or less than 35 cents a day”. And it’s rather convincing, to be honest. That is if you’re not aware of how Colonial Penn actually calculates your death benefit based on the premiums you pay (more about this in the subsequent section).

Like the other two products in their lineup, this policy requires no medical exam and features a locked-in premium. Your policy will remain in force as long as you’re paying the premiums.

Colonial Penn Life Insurance Review

Colonial Penn Life Insurance Rider: Early Payout Option

This is Colonial Penn’s Accelerated Death Benefit rider and it is available for both their renewable term and permanent whole life insurance. It allows policyholders to receive a portion of their death benefit in the event of a critical illness such as a heart attack or stroke.

While it works the same way as other accelerated death benefit riders, Colonial Penn seems to want to emphasize it and make it a significant selling point for their products.

Dubbed “Living Insurance”, they tout it as a combination of traditional life insurance and early payout option. In reality, however, it functions the same way as other accelerated death benefit rider from other companies.

Their disclaimer says it all: “An early payout option is an accelerated death benefit rider that allows you to receive part of your policy’s benefit if you’re diagnosed with a covered illness. The payout is subject to an administrative fee and repayment of a percentage of any policy loans and loan interest.”

The True Cost of Colonial Penn Life Insurance

If Colonial Penn promises no-medical exam, locked-in premiums, guaranteed coverage life insurance policies at prices that start at $9.95, there should be a catch, right?

If you watch and listen to their commercials, like this one, for example, you’ll realize that Alex Trebek’s monologue can rather be convincing. The same $9.95 starting price for people of varying ages and health condition? Here’s how the skit goes:

Woman 1: I’m age 54, and I was a smoker but quit—Alex, what’s my price?

Alex: You can get coverage for $9.95 a month.

Man: I’m 65, retired, and take medications. What’s my price?

Alex: Also $9.95 a month.

Woman 2: I just turned 80 and I’m on a fixed income. What’s my price?

Alex: $9.95 a month for you too.

If you’re a first-time buyer of life insurance and not familiar with its ins and outs, I can imagine this ad can be rather persuasive.

Just think about it. For less than $10 per month, they claim they can provide your loved ones with final expense benefits to lessen the financial burden when you pass away.

But while it’s true that all three customers above can get coverage at the same starting rate of $9.95 a month, it doesn’t explain how much they’ll get in death benefit for that amount.

Before we get into actual figures though, let me explain what “units of coverage” are and how they play a role in Colonial Penn’s pricing of their life insurance products.

Colonial Penn Life Insurance Review

Colonial Penn Units of Coverage Explained

When you request a quote from their website, you’ll be presented with a page that shows the benefit amount calculated in terms of “Units of Coverage”.

Most insurance websites are straightforward in presenting their quotes. A 60-year old non-smoker male, for example, will typically see something similar with this one:

Death Benefit Amount: $100,000

Premium you’ll pay per month (for 10 years): $20

When you visit and get a quote from Colonial Penn’s website, however, you’ll see something like this:

60-year old male from California Monthly premium
1 unit = benefit amount of $1,210 $9.95
60-year old female from California
1 unit = benefit amount of $1,618 $9.95

As you’ll notice, the death benefit is valued and shown “per unit”. Colonial Penn will adjust your death benefit based on a number of factors like your age, gender, location, and health (there will be some health questions on the application stage).

Going back to our table above, you can see that while both policyholders pay the same $9.95 per month premium, they differ in what their loved ones will get when they die.

Simply put, one unit is always priced at $9.95—however—how much death benefit you can get from that 1 unit will vary depending on the factors mentioned above. So if you want more coverage than what 1 unit gets you, you have to pay for more units.

Things could get rather expensive quickly when you realize you’ll need to buy a minimum of 7-9 units if you wish to have a death benefit of at least $10,000 (the average cost of final expense in America ranges from $7,000 to $10,000).

Using our example earlier and a goal to get at least a minimum of $10,000 for final expenses:

60-year old male from California
1 unit = $1,210 ; need 9 units to get $10,890 Monthly premiums = $89.55
60-year old female from California
1 unit = $1,618 ; need 7 units to get $11,326 Monthly premiums = $69.65

That’s how much you actually need to pay Colonial Penn on a monthly basis to get a worthwhile death benefit. The question now is, “Is it really cheaper than other guaranteed acceptance life insurance?”

The obvious answer, of course, is No.

Looking at the figures, you’re looking at paying close to $100 per month to get your beneficiaries sufficient final expense funds. And mind you, the death benefit becomes smaller the older the policyholder gets.

Not only do they get less death benefit the longer they keep the policy (assuming they don’t increase their premiums), they also have to pay more if they want to receive the same original benefit amount they got quoted for when they started the policy.

There are other life insurance companies out there that can easily beat these rates from Colonial Penn and even provide a bigger death benefit. And they also require no medical exams and accept people with health issues.

Colonial Penn Life Insurance Pros and Cons

Now that you know the real deal about how Colonial Penn is able to make claims of a locked-in premium of $9.95, let’s take a step back and get a bird’s eye view of both the good and bad stuff.

Pros Cons
No medical exam required on all of their plans Rates for their guaranteed acceptance insurance can get pricey quickly if you want a decent death benefit amount
Guaranteed acceptance Their ads can be misleading with regards to the true value of paying a $9.95 premium
Older people can get accepted even if they have health conditions Death benefits are small

Colonial Penn Life Insurance Verdict

“Live for today, plan for tomorrow”, says Colonial Penn’s website. And while that may sound promising, the truth is that Colonial Penn’s offerings fall short overall when compared to what you can get from other life insurance companies.

Running a quick quote from State Farm’s website (using the same 60-year old male based in CA) yields a $53.25 premium rate for a $10,000 final expense coverage. Check out our full State Farm Life insurance review for a more in-depth look.

AIG estimates a monthly premium of $63.17 for a $10,000 guaranteed acceptance coverage.

These are just examples and may differ from what you get quoted for, but it just goes to show that Colonial Penn’s offering is generally more expensive overall.

Lastly, let’s address the elephant in the room: The claims in their ads can be misleading.

To tell people that you only need to pay $9.95 per month to get life insurance coverage without clearly explaining how little death benefit you’ll actually get at that price is a deceiving way of presenting a product. They also don’t mention that the beneficiaries won’t get the full benefit if the policyholder dies within the first 2 years, which is very important considering this is final expense insurance.

Not everyone is familiar with per unit pricing of life insurance and most older people will probably get swayed with the cunning way Colonial Penn’s ads are presented.

According to other reviews we’ve come across for Colonial Penn, it revealed that their complaint ratio score of 2.66 in 2017 was higher than the national average of 1.0.

If you’re looking for the best life insurance price-to-value ratio, better look elsewhere as Colonial Penn’s offerings are simply more expensive. Whether its term, permanent, or guaranteed acceptance life insurance, you can easily get more coverage at a lower cost from other providers.

Ready to apply? Make sure to speak with one of our agents first to find the best life insurance company who will work with you.