AARP Life Insurance Review: What’s the Catch?

Written by Rob Pinner

If you are senior, then you probably have received some type of advertisement in the mail for AARP Life Insurance. We get asked a lot if it is as good a deal as it seems.  Well the short answer is no it is not, but they do have some niches that fit well with some customers. We will dive into their products and give you our opinion on what the pros and cons are with each.

Good for

  • Smokers with health problems
  • Guaranteed Issue Whole Life
  • Children’s Life Insurance

Bad For

  • Term Life Insurance
  • Death Benefits over $50K
  • Anyone that is moderately healthy

AARP’s life insurance products are sold through New York Life.  AARP is known for covering seniors with pre-existing medical conditions who would have difficulty getting life insurance otherwise.  All of AARP’s policies are non-medical or require no medical exam.

Life Insurance Products Overview

AARP through New York Life offer group term, whole life policies for seniors, and children’s life insurance.  All of their policies require no medical exams with one being guaranteed issue.  The coverage is either accepted or declined so the coverage is issued very fast. The negative is that AARP/New York Life are accepting higher risk applicants, therefore charging significantly higher premiums than most of the competition.

AARP Level Benefit Term Life Insurance

AARP offers group term life insurance coverage for their members, ages 50-74.  Their term life policies can be converted to a permanent life policy at any point while the coverage is in force.  The death benefits are small and range from $10K to $100K, which means if you have a large financial obligation this probably wouldn’t work.  Their death benefits are limited because they don’t require an exam.

If you don’t have a significant health problem or pre-existing condition, we highly recommend you look elsewhere for your term life insurance coverage.  Not only are the premiums higher than most other carriers, they increase over time.  If you notice it is called Level Benefit Term in contrast to most term policies are Level premium and Level benefit.  Level benefit means the coverage stays the same but the premium increases.  Coverage also ends at age 80.

The term life policies offered by AARP through New York Life are 1-year annual renewable term policies.  This may work for someone only needing the coverage for a short time, but the downside effect is the premiums increase as you get older. The increased premium is already pre-determined by AARP/New York Life and rise every 5 years.  When you enter the new age bracket, premiums increase.  I have a chart below that will explain in further detail:

Example is for a 60-year old male with $100K of coverage for 15 years.  If you bought an AARP policy, you would pay 3 different premiums over the life of the policy.

 

Period Monthly Premium
Age 60 to 64 $109
Age 65 to 69 $144
Age 70 to 74 $208
Average $226

 

We used a chart to show the difference in the cost of premium for someone in good health, average health, and even a smoker.  The difference is astonishing and the rising premium with AARP’s life insurance is not factored in.

AARP Whole Life Insurance-No Medical Exam Required

The AARP’s through New York Life no medical exam whole life policy is a simplified issue policy.  Sometimes called final expense or burial insurance, the amount of death benefit available is usually enough to cover funeral costs and some debt. AARP’s whole life insurance policy offers $5,000 to $50,000 of coverage to members age 50-80.

Whole Life policies, especially those with no medical exam usually come with a higher premium. Knowing this we also would not recommend this policy unless you have a health condition that would keep you from getting a traditional life policy.  However, if you are over the age of 50 and have a medical condition that is over 2 years and well-managed, this may be an option for you.

AARP’s, just like other whole life policies does build up cash value.  This money can be borrowed against if the need arises.  One unique feature that comes with AARP’s whole life policies is that premium payments end at age 95. Yeah yea we know most people don’t live to 95, but the option to stop payments at age 95 and continue the coverage in not common among life insurance carriers.

AARP’s whole life also comes with 2 riders at no additional cost.  If you were to become disabled or ill these would certainly come in handy:

  • Waiver of Premium: If you are required to stay in a nursing home because of disability or illness, your premiums will be waived for the entirety of your stay or until your turn 80. Before premiums can be waived you must have been in the nursing home for at least 6 months.
  • Accelerated Death Benefit: This feature comes with all life insurance policies so it’s not anything unique to AARP. This rider allows you to access up to 50% of your policy’s death benefit if a doctor believes you are terminally ill and have a life expectancy of 12 months or less to live.

AARP Guaranteed Acceptance Whole Life

AARP through New York Life also offers a guaranteed issue whole life policy.  This policy offers coverage with no exam and no medical questions asked.

  • Offered to members between ages 50-80
  • No premium payments at age 95 (Just like their Whole Life Insurance)
  • Access to 50% of death benefit if diagnosed with a terminal illness and a life expectancy of 12 months or less
  • No health questions or exam

The major differences between the guaranteed acceptance policy and AARP’s whole life insurance are:

  • Only covers accidental death the first 2 years of coverage. If death is not accidental within the first 2 years, then the beneficiary would receive 125% of premiums paid into the policy.  After 2 years you will have full coverage.
  • Death benefits range from $2,500 to $25,000

The rates for AARP’s guaranteed acceptance whole life policy are competitive, but if you are not a member it will not be beneficial to join just to sign up for this product.  I have attached a chart comparing some of the other top guaranteed issue companies.

 

AARP Child Whole Life Insurance (Young Start Program)

The Young Start program allows parents or grandparents of a child younger than 18 can purchase up to $20,000 of death protection with no medical exam.  The program comes with 3 levels of coverage:

Death Benefit Monthly Premium
$10,000 $5.00
$15,000 $7.50
$20,000 $10.00

 

These types of policies are intended to protect parents and relatives from the costs of a child dying early.  The Young Start program does not end when the child turns 21, like some other companies, and the premiums remain level throughout the lifetime of the policy.  These policies also build up cash value slowly but can grow for decades and are available for loans.

Another unique featured off with the Young Start program is if you pass away the premiums are waived until your child or grandchild turns 21.  At this time, they will have to start paying the scheduled premium when originally purchased.

Our Thoughts

While AARP’s life insurance products our through a strong financial company, New York Life, it seems they receive a number of critical reviews with regards to how well they handle claims.  With this said and the fact that their products are usually priced significantly higher than most of their competitors we do not recommend AARP’s Life Insurance programs. Even the unhealthy, if they shop around will be able to find a better deal. If you have any questions or comments please let us know.

 

 

Rob Pinner
Rob Pinner

I have been a licensed insurance agent for over 15 years.  If you have any questions or comments please don’t hesitate to give us a call.

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