Colonial Penn $9.95 Life Insurance - Read the Fine Print
by Don Drake, Connelly Law Offices, Ltd.
"For the past few years, we have been bombarded with commercials from Colonial Penn and their spokesperson and employee, Jonathan Lawson," stated professional fiduciary and certified elder law Attorney RJ Connelly III. "Lawson makes some great promises regarding burial insurance coverage with the company's 995 plan. As the ad finishes, the price is dangled in front of you, 'just $9.95 a month,' Lawson promises, 'less than thirty-five cents a day,' followed by the promise that 'the premiums will never go up or be abruptly canceled.' It sounds like a great deal for seniors lacking such insurance, especially those who may be uninsurable due to pre-existing conditions. So, just what do you get for your $9.95 a month? Well, not much when you realize just how this plan works."
"Mr. Lawson is selling an insurance policy called a final expense policy," continued Attorney RJ 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 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 your purchase," said Attorney RJ Connelly. "Some seniors enticed by this offer may not survive the 'two-year' waiting period because of the pre-existing conditions that may have."
The ad further states that the application is easy, acceptance is "guaranteed," and there is no need to answer any medical questions. All that is required of you is to submit the form along with the payment, and you are fully protected for the amount you are qualified for. But again, the devil is in the details, or in this case, the units. So, if you want more coverage, you need to buy more units, and suddenly, that $9.95 monthly premium escalates. Let's explore this further with some insurance industry professionals.
Units Not Benefits
Choice Mutual is an independent insurance agency selling insurance in all 50 US states, including DC, and on their website, they explain exactly what a "unit" is that Colonial Penn sells. According to them, a unit corresponds to how much life insurance a person gets based on age and gender. No matter your gender or age, everyone still only pays $9.95 per month. What adjusts is how much coverage each unit provides. Once you look at a Colonial Penn rate chart, you quickly realize that the company's guaranteed acceptance plan is costly relative to what other life insurance companies charge. The older you are, the less coverage that a single unit provides. Below is a chart that outlines exactly how much 'coverage' one unit offers based on age and gender. And as you will see, your coverage will decrease when you need it the most.
"The difference between most life insurance companies and Colonial Penn life insurance company is that you can only buy units, not benefits," said Danny Ray of the PinnacleQuote Life Insurance Specialists headquartered in Florida. "Unfortunately, owning the 995 plan per unit will cost your family because when you pass away, there is less than what you started with -- much less!"
"For example, if you were a 70-year-old male, and wanted $15,000 in coverage, keep in mind what $9.95 buys you per unit. In fact, at this age, one $9.95 unit will offer coverage of $717," continued Ray. "So, if you wanted $15,000 in coverage, you would have to purchase 19 units... [but] here is the gimmick, the most units you can purchase from Colonial Penn is twelve, so your maximum coverage would be $8,604. That would cost you $119.40 per month."
"What Colonial Penn is doing is not illegal, as they are selling an insurance product, but what becomes clear when you begin to do your homework is that their 995 Plan becomes quite expensive when you begin buying units just to receive minimal coverage," said Attorney RJ Connelly. "Further, other companies offer plans that take effect quicker without a lengthy waiting period, often at a lower cost, and most people will qualify. Like everything else, do your homework when looking for a final expense policy to ensure you get the best deal for your money."