Colonial Penn's 995 Plan - Not the Best Value for Your Money
by Don Drake, Connelly Law Offices, Ltd. 5.22.24
"In the past month, there has once again been a proliferation of commercials featuring Colonial Penn's representative and employee, Jonathan Lawson," said professional fiduciary and certified elder law attorney RJ Connelly III. "Lawson touts the benefits of the company's 995 plan, emphasizing its affordable burial insurance coverage. The advertisement concludes with the enticing offer of 'just $9.95 a month,' which Lawson asserts is 'less than thirty-five cents a day,' and assures that 'the premiums will never increase or be abruptly terminated.' This may seem attractive for seniors without such insurance, particularly those deemed uninsurable due to pre-existing conditions. However, a closer examination reveals that the benefits of the $9.95 per month plan are quite limited."
"Mr. Lawson is selling an insurance policy called a final expense policy," continued Attorney Connelly. "He is not telling you that these policies are sold in units with some expensive details omitted from his pitch. Sadly, many seniors think this policy is a good deal for $9.95 a month, which in today's economy may not even buy you a sandwich at a fast-food restaurant. But what this company is counting on is that seniors won't fully understand how the policy works and will fall for the inexpensive rate being advertised when picking up the phone and making the call."
"Also, if you look at the fine print of these commercials, you will see that full benefits are also unavailable within two years of the purchase. Some seniors enticed by this offer may not survive the 'two-year' waiting period because of pre-existing conditions."
Units Not Benefits
The advertisement highlights the simplicity of the application process, guarantees approval, and assures that no medical information is required. Submission of the form and payment ensures full coverage for the qualifying amount. However, the complexity lies in the details, specifically the units. Additional units must be purchased for increased coverage, leading to a significant rise in the monthly premium of $9.95.
Choice Mutual is an independent insurance agency that operates in all 50 US states, including DC. On their website, they provide a detailed explanation of what a "unit" represents in the context of the insurance policies offered by Colonial Penn. This explanation clarifies that a unit corresponds to the amount of life insurance coverage a person receives, which is determined by age and gender. Regardless of gender or age, the monthly cost for each unit remains fixed at $9.95. However, the coverage provided by each unit varies based on these factors.
Upon reviewing Colonial Penn's rate chart, it becomes evident that their guaranteed acceptance plan is comparatively expensive compared to other life insurance companies. Additionally, it is apparent that as individuals age, the coverage provided by a single unit decreases. The detailed chart below illustrates the specific coverage amounts offered by one unit based on age and gender, highlighting that coverage diminishes when it is most needed.
The distinction between Colonial Penn life insurance company and most other life insurance companies is that you purchase coverage units rather than receiving specific benefits with Colonial Penn. According to Danny Ray of PinnacleQuote Life Insurance Specialists, buying the 995 plan per unit may not be the most cost-effective option for your family, as the coverage amount decreases over time.
In the TV ads, Mr. Lawson states that Colonial Penn life insurance is an "excellent choice," but is it really as the $9.95 plan is more costly than other insurance providers? Data on life insurance indicates that alternative options offer more coverage for the amount spent. Additionally, unlike Colonial Penn, most people can obtain life insurance without a waiting period from other providers. This applies even if individuals seek final expense insurance with pre-existing conditions.
For instance, a 65-year-old male would receive $896 of life insurance from a single 995 unit. To acquire approximately $10,000 in whole-life coverage, he would need to purchase twelve units, amounting to $119.40 monthly ($9.95 x 12). The same 65-year-old man would pay $56.48 monthly with Mutual of Omaha for a $10,000 policy. In addition, Mutual of Omaha's Living Promise policy has no waiting period. Compared to Colonial Penn, most other life insurance companies offer lower rates for final expense insurance.
And, according to the NAIC’s National Association of Insurance Commissioners, Colonial Penn has received significantly higher customer complaints than its competitors. The complaint index, which tracks and compares the number of complaints filed by insurance companies of similar size, revealed that Colonial Penn received a score of 2.98 in 2022. This indicates that they had nearly three times as many complaints as another life insurance company of similar size.
A Final Word
"While Colonial Penn's activities are not illegal or a scam as they involve selling an insurance product, a closer examination reveals that their 995 Plan may not offer good value for seniors on a limited income who are seeking minimal coverage," stated Attorney Connelly. "Other companies offer plans with faster activation, shorter waiting periods, and broader eligibility at lower costs. It is strongly recommended that consumers conduct thorough research on final expense policies to ensure they get the best deal for their money."
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