Colonial Penn Life Insurance: Legit Or A Scam?

Colonial Penn Life Insurance offers whole life insurance and guaranteed acceptance policies for individuals over 50. The company has received a high volume of complaints and offers relatively low coverage amounts, leaving customers wondering if it is a legitimate option.

Colonial Penn's high volume of consumer complaints

Colonial Penn has received a high volume of consumer complaints relative to its size, according to the National Association of Insurance Commissioners (NAIC). The company's National Complaint Index score is 2.67, with a score of 2.00 considered "twice as high as expected in the market".

The company's complaint index score has decreased in recent years, from 25.04 in 2021 to 21.94 in 2022, and 7.81 in 2023. This suggests that Colonial Penn has been working to address its high volume of consumer complaints.

The majority of complaints against Colonial Penn centre around issues with the company's claims process, advertising, and customer service. Many customers have reported issues with receiving payouts, with some stating that the company has been unhelpful and unresponsive. There are also numerous complaints from customers who say they did not understand the terms and conditions of their policies and felt they had been misled.

The company's low coverage amounts

Colonial Penn's coverage amounts are considered low compared to other insurance companies. The company offers whole life insurance policies with coverage ranging from $1,000 to $50,000. The maximum coverage amount depends on the age and state of the applicant. For instance, in New York, the maximum coverage amount is $25,000 for both men and women.

The company's guaranteed acceptance life insurance policies are sold in "units," with each unit costing $9.95. The number of units purchased determines the total death benefit paid out to beneficiaries. The value of each unit varies based on age and gender. For example, for those closer to 50, one unit may provide around $1,500 in coverage, while for those closer to 75, it may provide about $500 to $800 in coverage.

Colonial Penn's coverage amounts are designed to cover end-of-life expenses and funeral costs. While the company offers accessible life insurance solutions for individuals aged 50 and above, the low coverage amounts may not be suitable for those seeking higher death benefits.

Colonial Penn's pricing structure

The price per unit is locked in, so your premium will never increase as long as your coverage lasts. Additionally, as long as you pay your premiums, your coverage cannot be canceled. The benefit amount also won't decrease due to age.

Colonial Penn offers two types of whole life insurance policies: Guaranteed Acceptance Life Insurance and LifeChoice Whole Life Insurance. The Guaranteed Acceptance policy is available to individuals aged 50-85 in most states, while the LifeChoice policy is only available in New York for males aged 50-73 and females aged 50-75.

The Guaranteed Acceptance policy does not require a medical exam or health questions, and acceptance is guaranteed. However, there is a two-year waiting period before the full death benefit is paid out. If the insured person dies from non-accidental causes within the first two years, beneficiaries will receive a portion of the benefit, depending on the state, but not the full death benefit amount.

The LifeChoice policy, on the other hand, requires a short medical questionnaire but does not have a waiting period. It also offers coverage amounts up to $25,000, while the Guaranteed Acceptance policy offers a maximum of $25,000 in most states and $15,000 for individuals aged 66 and above.

It's important to note that Colonial Penn's coverage amounts are considered relatively low compared to other insurance providers. Their unique pricing structure may be confusing to some, as the amount of coverage per unit varies, and purchasing enough units to match your desired coverage amount can be expensive.

The pros and cons of Colonial Penn's life insurance

Colonial Penn Life Insurance is a well-known name in the life insurance industry, but is it the right choice for you? Here are some pros and cons to help you decide.

Pros:

• No Medical Exam Required: One of the standout features of Colonial Penn's policies is that they do not require a medical exam, which is beneficial for those seeking quick and hassle-free insurance approval.
• Guaranteed Acceptance: Colonial Penn offers guaranteed acceptance whole life insurance, which does not require any medical exams or health questionnaires. This is ideal for those who might not qualify for traditional policies due to age or health issues.
• Fixed Premiums: Colonial Penn's whole life insurance policies offer fixed premiums that do not increase with age or changes in health status.
• Financial Strength: The company has received an A rating for financial strength from AM Best, indicating an excellent level of financial stability and the ability to pay claims consistently.
• Accessibility: Colonial Penn's policies are accessible to older individuals, with coverage available for applicants up to 85 years old.
• Online Quotes and Applications: Colonial Penn offers an online platform for customers to easily obtain quotes and submit insurance applications.
• 30-Day Free Cancellation: Colonial Penn provides a 30-day free cancellation period, allowing customers to review the policy and decide if it meets their needs without any financial commitment.

Cons:

• High Number of Complaints: Colonial Penn has received a high volume of complaints relative to its size, as indicated by its National Complaint Index score of 2.67 from the NAIC. This may be a cause for concern for potential customers.
• Low Coverage Amounts: The company offers relatively low coverage amounts, with a maximum of $25,000 for most applicants. This may not be sufficient for those seeking higher death benefits.
• Limited Policy Types: Colonial Penn primarily offers guaranteed acceptance whole life insurance and does not provide term life insurance or other types of permanent coverage. This limited selection may not meet the needs of individuals seeking alternative policy options.
• Confusing Pricing Structure: Colonial Penn's pricing structure is based on "units," and the amount of coverage each unit provides varies by age and gender. This unique structure can be confusing for customers and may result in individuals being underinsured if they do not calculate their needed coverage accurately.
• Misleading Advertising: The company's advertising may be misleading, as the starting price of $9.95 per month only buys one unit of coverage, which is very little. Customers may end up paying significantly more to achieve their desired level of coverage.

How to file a claim with Colonial Penn

Colonial Penn Life Insurance offers peace of mind with guaranteed acceptance policies tailored for those aged 50-85. The company provides accessible life insurance solutions with no required medical exams, fixed premiums, and policies that build cash value.

Step 1: Contact Colonial Penn

Get in touch with Colonial Penn to inform them of your intention to file a claim. You can reach them by calling their toll-free number or through their website. Their contact information is as follows:

• Sales assistance: (877) 540-3186
• Policyholder service: (800) 523-9100
• New York policyholders: (800) 323-4542
• Mailing address: Colonial Penn Life Insurance Company, Life Claims Department, PO Box 1918, Carmel, IN 46082-1918

Step 2: Obtain the required forms

Colonial Penn will provide you with the necessary forms to initiate the claims process. These may be sent to you electronically or as hard copies. Ensure that you fill out the forms completely and accurately. The main form you will need is the "Claimant's Statement For Life Insurance Death Benefits."

Step 3: Gather supporting documents

You will need to submit a certified copy of the death certificate along with the completed forms. The funeral director can assist you in obtaining this document. Additionally, you may need to provide additional paperwork, such as estate or trust documentation, if requested by Colonial Penn.

Step 4: Decide on the payout structure

Choose how you would like to receive the payout. Colonial Penn may offer options such as a lump sum or periodic payments.

Step 5: Submit the claim and wait for approval

Once you have completed the forms and gathered the necessary documents, submit your claim to Colonial Penn. They will review the claim, and if there are no concerns or additional questions, they will approve it and issue the payment. The entire process can take around one to two weeks, but it may vary depending on the complexity of the case.

Remember to carefully review the requirements and procedures outlined by Colonial Penn to ensure a smooth and timely claims process.

Frequently asked questions