AARP Permanent Life Insurance: You’ve heard of AARP before. AARP are marketing geniuses and are always telling you about how easy and affordable life insurance is for you… but are they one of the best life insurance companies available? A better question might be, is AARP even a life insurance company?
Since AARP has over 36 million members, they are very creative in their marketing efforts. How exactly does AARP provide affordable life insurance? You may have wondered about that, because life insurance premiums are based on your age and health – the older you get, the more expensive the coverage is.
So, how can AARP promise coverage at “affordable” rates?
Is AARP a life insurance company?
This is one of the most frequent questions we get about AARP.
The quick answer is…NO! AARP is not a life insurance company.
They aren’t even an insurance company. They can be described as a marketing organization that provides their image to other companies at a cost.
With regards to life insurance, New York Life is the current high bidder for their life insurance business, United Healthcare for health insurance and The Hartford for car insurance.
If you buy life insurance through AARP, you’ll usually pay much more than if you did some comparison shopping with competing life insurance companies.
>>Read more about AARP here: AARP Life Insurance Review
AARP Permanent Life Insurance
First thing you need to know from the beginning is that AARP uses New York Life for their life insurance policies. That’s right. You’re limited to only 1 company when you shop with AARP.
They won’t be shopping from the best life insurance companies for you, just 1. With regards to life insurance types, AARP offers 2 permanent life insurance options for consumers.
1. Whole Life
- The first option with AARP is a Whole Life insurance policy that can provide you up to $50,000 worth of life insurance coverage.
2. Guaranteed Issue
- The 2nd policy with AARP is a Guaranteed Issue Whole Life policy. This is an option for anyone who can’t qualify for their traditional whole life policy.
AARP Whole Life Insurance
AARP sells a whole life insurance policy that is similar to most whole life policies. Their whole life policy will build cash value with level life insurance premiums. The death benefit is fixed and will last for your entire life just as long as you pay the policy’s premiums.
What’s the major drawback? COST
If you compare AARP whole life to the competition, you’re going to pay more in the short and long term.
>>More: Best life insurance for seniors
AARP Whole Life Features
Here are the features of AARP Permanent life insurance policy:
- Coverage Amounts: Policies range from $5,000-$50,000
- No Exam: There is no required medical exam for their permanent policies.
- Policy Age Ranges: AARP’s Whole Life and Guaranteed Acceptance policies are available for anyone between 50 and 80 years old.
AARP Whole Life policy case study
Let’s compare rates for a 50 year old man looking to shop for a $25,000 whole life insurance policy.
With AARP he’s looking at a monthly rate of just over $81.
If our shopper contacted Life Insurance Blog and had us shop his case from over 60 top rated life insurance companies, he’d pay just over $58 per month!
AARP
Too Much!-
Male
-
Age 50
-
$25,000 Face Amount
Competitor
BETTER DEAL!-
Male
-
Age 50
-
$25,000 Face Amount
That’s a savings of…
- $23 per month, and…
- $276 per year, and…
$5,520 over 20 years!
That’s a lot of money saved for the same exact coverage!
The Guaranteed Issue Policy
The “magic” of AARP’s no-medical exam for life insurance is called “simplified issue.”
In layman’s terms, it means that your ability to buy life insurance is based on answering a few health questions. No one comes to draw your blood or collect a urine sample. You aren’t poked and prodded.
Sounds like a good deal right? Not so fast!
AARP doesn’t actually issue the insurance policy. Remember that New York Life does.
The two have struck a deal to offer group life insurance and permanent insurance for seniors. Because there’s no medical exam, the insurance company must charge a higher premium than it otherwise would.
Why? Because it has to assume that it’s going to insure at least a few “high-risk” people.
Basically, when you buy a simplified issue policy, and you’re reasonably healthy, you’ll be subsidizing a person whose health isn’t so great. You both get insurance, which is good, but you end up paying more for coverage than if you had taken a medical exam and gotten what’s called a “fully underwritten” policy.
AARP Life Insurance Benefits
AARP has a reputation for being an advocate for senior citizens. It uses its influence to offer life insurance that looks pretty good on paper. For example, when you buy permanent insurance coverage from them, you get:
- No waiting period
- No medical exam
- A simple questionnaire to fill out
- Up to $50,000 in permanent life insurance
- Simple application process
- Rates that don’t increase based on age
You also get a cash value component to help augment your other savings. It’s money you can use during your lifetime for pretty much anything you need. Any cash you borrow from your policy, however, does decrease the amount of death benefit that is left to your heirs unless you pay the money back to the policy before you die.
AARP Life Insurance Disadvantages
While the Q&A section on AARP’s Permanent coverage does say that you can’t be singled out for a rate increase..some policies do have increasing premiums.
That is if AARP decides to raise rates for everyone. This is why they use the language “singled out” – since you won’t be singled out if rates increase for everyone.
Term Rates are increased every five years even though the term product states that it’s a level term policy. Also, if you’re converting a term policy to a permanent policy, the new permanent insurance premium will be based on the age at which you make the conversion.
Beware of rising premiums
Let’s dive a little deeper into how AARP may raise your rates.
AARP and their whole life insurance premiums are advertised to be fixed all the way up until you pass away. These advertisements often say that AARP’s premiums will never increase no matter what happens.
Wishful thinking.
AARP will raise their premiums occasionally. There have been reports that people have had their premiums raised over 40% in one month.
While this is infrequent, it may happen. Why? Well inflation is something that can be one of the culprits. This means that the cost of providing insurance to all of AARP’s customers can be a bit more than they can afford at the present rates. If this happens, AARP can raise the life insurance premiums. This is business, so be aware that your rates can increase.
Buying The Best Policy
While AARP isn’t a terrible organization, you probably could do better in terms of rates. AARP, like Colonial Penn – isn’t bad, they just don’t provide great value.
For example, if you buy a fully underwritten term life insurance policy from Prudential or Banner, your rates will almost certainly be lower than if you took the simplified issue policy. If you need permanent insurance coverage, you’ve got two solid options: GUL and whole life.
- Whole Life: Whole life insurance is basic permanent insurance protection. You get guaranteed death benefits and level premium payments for life.
- GUL: Also known as a guaranteed no-lapse universal life policy, is universal life coverage where the insurance company guarantees that your policy will never lapse as long as you continue paying the no-lapse target premium specified in the policy contract. Typically, this is a level premium that never increases.
Related Article: Best Guaranteed Universal Life Insurance Companies
AARP Whole Life insurance quote
If you’re set on getting an AARP life insurance quote, you’ll have to go directly to their website. Remember, they only use 1 company to provide life insurance. You will receive a small selection of New York Life term and whole life insurance options.
Will AARP give you the best rate?
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Bottom Line
Go with a fully underwritten policy if possible. But if you don’t think you’ll qualify, even the no-exam whole life coverage you get from an independent life insurance broker should offer lower premiums than anything you’ll get from AARP.
That’s key – work with an independent broker, and ask a lot of questions. You’re going to find that your premium is entirely driven by your age, health, and personal insurance needs. When it comes to insurance, the more personalized the service, the better.
Life Insurance Blog represents over 60 life insurance companies and can help you compare quotes. Use our instant quote tool on this page or call us.
If you’d like to learn more please check out some of our popular posts such as life insurance settlement options, life insurance rates by age and secrets of life insurance.
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