Who Is Colonial Penn?
|Type||Life Insurance Carrier|
|Address||399 Market Street |
Philadelphia, PA 19106
|A.M. Best Rating||A-|
Founded in 1957, Colonial Penn is a life insurance company based in Wyomissing, Pennsylvania. The company offers life insurance products to consumers primarily through direct mail and television.
In 1968, Colonial Penn became one of the first life insurance companies to offer a guaranteed acceptance plan for those 50 and over. Currently, it is the largest provider of burial insurance coverage in the United States, competing with companies like Gerber Life, Mutual of Omaha, and Globe Life, and AARP.
While Colonial Penn offers traditional term life insurance (for adults 18-75),…
Colonial Penn Burial Insurance Overview
This section will provide a quick insurance 101 refresher for those unfamiliar with burial insurance.
What Is Burial Insurance?
Burial insurance is just an informal name for whole life insurance policies that are marketed towards seniors.
People refer to policies like these as “burial insurance” because of the smaller payouts (typically under $25K) and the typical use of funds (to cover final expenses). These include burial or cremation costs, embalming services, or paying off debt that the deceased still had outstanding.
For this reason, policies like these are often also called “funeral insurance” or “final expense insurance”; throughout this review, we will be using all of these names interchangeably.
Finally, note that there is nothing written into the policy contract that restricts the use of funds. If your beneficiary wants to use the funds on a vacation for her family, there is nothing to stop her from doing so.
Burial Insurance = Whole Life Insurance
Regarding the policies themselves, burial insurance is nothing more than whole life insurance.
As with all life insurance policies, the product you are purchasing is a payout when you die. If you have a $100,000 policy, this means that your life insurance company will pay your beneficiary $100,000 when you die.
Whole life insurance policies provide you lifetime coverage (i.e., your whole life). This differs from term life insurance, which covers you for a pre-determined period of time (called the “term”), usually between 10 and 30 years.
Colonial Penn Whole Life Insurance
Before we dive into the Company’s well-advertised $9.95 guaranteed acceptance plan, let’s review Colonial Penn’s standard whole life insurance offering.
See below a summary of the policy’s features.
Whole Life Insurance
Eligibility & Coverage Period
Regarding eligibility, any U.S. resident ages 40-75 can buy a policy can apply and purchase a policy (50-75 years old in New York).
As suggested by its name, whole life insurance provides coverage for your entire lifetime (as long as you keep paying your premiums, of course).
Your benefits will never terminate, no matter how old you are.
Like most burial insurance policies, this one does not require a medical exam.
There are health questions, though, and these are how Colonial Penn decides whether or not to approve you.
Due to the health-based underwriting, these policies do not have a waiting period.
Colonial Penn Guaranteed Issue Life Insurance
The most popular Colonial Penn life insurance product is its guaranteed acceptance whole life insurance policy.
See below a summary of the policy’s features
Guaranteed Issue Whole Life
Eligibility & Coverage Period
Regarding eligibility, any U.S. resident ages 50-85 can buy a policy (50-75 years old in New York) can apply and purchase a policy.
Because burial insurance is a whole life policy, as state above, coverage lasts for your entire lifetime (as long as you keep paying your premiums).
Guaranteed Acceptance (No Underwriting)
The key draw of this product is its “guaranteed acceptance” feature. No matter what, you cannot be denied coverage for health-related reasons.
Two-Year Waiting Period
If you were wondering how a life insurance company could afford to guarantee acceptance to everyone, regardless of medical history, and remain profitable, you’re right that something is missing.
Colonial Penn can guarantee approval because of a two-year limited benefit period (or “waiting period”). Only after this two-year waiting period is the full death benefit paid.
If the insured person dies during the first two years of coverage, the beneficiary receives a limited death benefit (the premiums paid to that point, plus 7% interest).
If the non-accidental death occurs after this two-year waiting period, the policy’s beneficiary will receive the total payout amount. This goes for death from any cause (including suicide and drug overdose).
This protects Colonial Penn from fraudsters who might buy a policy knowing that they will die soon. Otherwise, these individuals could receive the full life insurance benefit for only a few months’ worth of premium payments.
Note that accidental death always receives the full death benefit, regardless of when it occurs.
Guaranteed Life Insurance Coverage For $9.95?
Colonial Penn life insurance commercials are among the most recognizable (and frequent) examples of final expense insurance marketing you’ll encounter. And their promise to offer you coverage for only $9.95 in monthly premiums is always featured front and center.
Is this too good to be true? Why would Colonial Penn quote everyone the same life insurance rates?
A Fixed Price For Variable Amounts Of Coverage
Colonial Penn isn’t afraid to buck the trend when it comes to selling burial insurance coverage.
Most life insurance carriers let you choose how much insurance coverage you want. They then tell you the monthly premium price they can offer you.
Colonial Penn does it in reverse. They allow you to choose your monthly payments (in multiples of $9.95 per month) and then let you how much coverage they can offer you.
$9.95 always buys you one “unit” of coverage.
And how much coverage does that unit give you? That’s where the Company’s minimal underwriting comes in depends on your age.
How Much Does Colonial Penn Burial Insurance Cost?
Colonial Penn approaches life insurance pricing different from its competitors. Most life insurers ask customers how much coverage they want and then quote them a price.
Colonial Penn looks at it the other way. They assume that customers want to leave their families with as much money as they can afford to.
$9.95 always buys you one “unit” of this Colonial Penn guaranteed acceptance policy and customers can buy up to 8 units.
Colonial Penn Pricing: An Example
An example may make it easier to understand. The customer is a 55-year-old male living in California. If this customer says that he wants to buy one unit of insurance (at $9.95 per unit), Colonial Penn will let him know that this monthly rate will buy him $1,560 of coverage.
If this is enough burial coverage for you, then your monthly premium payments will be $9.95 (and will remain at that price for the lifetime of the policy).
Additional coverage can be purchased at the same rate (up to eight units). So if you choose to buy 5 units, you will pay $49.75 and receive $7,800 of coverage.
How many units should you buy? That depends a lot on your state, as average funeral expenses vary by geography. Check out our full article on funeral costs to hear more on this topic.
Colonial Penn's Burial Life Insurance Application
The application for Colonial Penn’s funeral insurance product could not be more simple.
The Paper Application
If you prefer to apply by mail, your application will be just as easy as the above.
Colonial Penn Funeral Insurance FAQs
Before we dive into what third parties have to say about Colonial Penn, let’s check off some additional frequently asked questions about the Company and their guaranteed acceptance burial insurance product.
Colonial Penn sells burial insurance in two varieties: standard whole life insurance and guaranteed issue whole life.
The guaranteed issue policy involves no medical exam and no health questions.
The standard whole life policy involves “simplified underwriting.” In other words, no medical exam, but you WILL have to answer a handful of health questions.
If your policy builds cash value, then yes, you can take out a loan against this amount. You will be charged 8% interest, compounded annually. Any amount that has not been repaid at the time of death is simply deducted from the death benefit.
Yes, there is a two-year waiting period. If the insured dies of a non-accidental cause within the first two years, Colonial Penn will simply pay you back your premiums (with 7% interest). Without this waiting period, they would not be able to guarantee approval.
Colonial Penn Life Insurance Reviews (3rd-Party)
It’s tough to know how much weight to give customer reviews when the review count is low, since it is often the angriest customers that are most likely to write a review.
On TrustPilot, a third-party site that aggregates customer reviews, Colonial Penn has an average rating of 2.9 from 2 reviews.
You can find screenshots of these reviews at the top of the page.
Concerns raised in these reviews include poor customer service, a pushy sales experience, and difficulty getting a refund despite Colonial Penn’s advertised no-obligation period.
Better Business Bureau (BBB) Rating & Reviews
Colonial Penn Life Insurance Company has been a member of the reputable Better Business Bureau since 1985 and currently holds an A+ BBB rating. To understand how this rating was determined, see the following page on the BBB’s ratings elements.
The Company has 136 customer complaints filed with the BBB over the past three years.
Financial Strength Ratings
Colonial Penn has strong financial strength ratings, which indicate that they are almost certain to have the funds to pay out on your life insurance claim, regardless of the economic environment.
Colonial Penn Life Insurance Company currently holds the following ratings:
- A.M. Best: A-
- S&P: A-
- Moody’s: A3
- Fitch: A-
If you want to be buried (instead of cremated) and you or your loved ones do not have $10,000 to spare to cover the cost of a funeral, you should certainly look into purchasing final expense insurance.
Does Colonial Penn’s famous $9.95 burial insurance deserve you as a customer?
There is no doubt Colonial Penn is a brand-name insurance company with a smooth application process and a strong history of paying out on claims.
And while the $9.95 price point may be tempting, the issue is how little coverage you get (between $500 and $2,000 of coverage per $9.95 “unit”).
Is Colonial Penn Burial Insurance Worth It?
If you prefer cremation and are looking to fund that, then Colonial Penn may be worthwhile for you. Especially since most other life insurance companies will not sell you coverage small enough to result in monthly premiums of $9.95.
However, if you want a traditional burial and funeral service, payouts this small will not do much to cover these expenses. While you can scale down the extravagance of the funeral service, you cannot buy half a casket or half a headstone; in other words, there is a minimum amount you need to spend.
In any case, keep in mind that you can cancel your policy at any time without a penalty. Colonial Penn has a 30-day “try it on” period, during which you can cancel and get a refund for your first premium payment.
Therefore, if you are currently without coverage, it may not hurt to buy a policy now and cancel it when you find a better deal in the future.
We hope you found this Colonial Penn Life Insurance review helpful. If you have any questions, don’t hesitate to leave a comment or send us an email at hello [at] getsure.org, and we’ll get back to you within 24 hours!
The GetSure Team