The Truth About AARP Life Insurance

There are many life insurance options that advertise specifically to seniors. If you’ve watched an infomercial or checked your mail, you’ve seen advertisements for life insurance choices designed specifically for seniors. AARP Life Insurance is one of the most widely-advertised senior life insurance companies.

As you know from reading our blog: we don’t recommend these options. Being a senior rarely hurts your chances for affordable life insurance. You’ll often get a better price if you go with an independent-agent-approved life insurance policy. 

AARP has long been considered a reputable source for anyone over the age of 50. AARP is a nonprofit organization that focuses on senior issues, boasting more than 38 million members. They offer a variety of benefits to those who are members, including:

• access to their publications
• a jobs board
• health care options
• financial services
• discounts to a variety of retailers
• life insurance

AARP Life Insurance: The Basics

AARP is not a life insurance company. Rather, they provide their members with life insurance policies through New York Life Insurance Co.

AARP offers both term and whole life insurance options. AARP insurance advertises simple underwriting processes – meaning no medical exam is necessary, and coverage is typically issued quickly.

Simplified life insurance options come with higher premiums. Additionally, you must be a member to qualify for their insurance options, and membership prices hover right around $16/year. 

AARP’s term life insurance is available to members between 50 and 74. Their term policies come with the option to convert to a permanent life insurance policy at any time. Your spouse can also qualify for a life insurance policy, between the ages of 45 and 74.

The Hidden Costs of No-Exam Policies

With a no-exam life insurance policy your death benefit will be lower than with a traditionally-underwritten policy. For example, the death benefits for AARP’s term life insurance option only go to $100,000. The benefit may not be enough to cover your family’s financial needs after you pass. This leaves them to pay out-of-pocket for final expense needs.

Additionally, AARP term life insurance premiums are more expensive. These policies are not “level term” policies; rather, they are “level benefit” policies. This means that your death benefit will stay the same and your premiums will increase.

These policies are flexible: they are typically good for one year, with annual renewal options. The downside: your premiums increase every five years, depending on what five-year age bracket you’re classified into. Another downside is that this type of coverage ends at 80 years of age. 

AARP’s term life conversion option allows you to convert your coverage into a permanent policy before you turn 80. The new permanent policy will be rated based on your age. The permanent policy will also be a no-exam life insurance policy option. You wil be expected to answer a few health questions when applying.

AARP Whole Life Insurance

Like term life insurance with AARP, the permanent policies the company offers are also no-medical exam. Now, if you’re reading this thinking “why do these policies exist if nobody should get them,” there may be instances in which this form of coverage is acceptable. Give us a call so we can walk you through your options. 

Aside from a pre-existing condition that would prevent you from passing a medical exam, you may want to think twice before buying AARP’s whole life insurance for seniors. 

AARp whole life insurance is “final expense” or “burial” insurance. You should avoid any type final expense or burial policy due to high premiums and low death benefits.

This insurance option is no different. With benefit options ranging from $5,000 to $50,000, qualifying individuals form the ages of 50 to 80 should look into other insurers. The benefits of this type of insurance are certainly substantial enough to cover funeral costs, but aren’t enough to cover any medical debts, mortgages, or estates that you want to leave your loved one.

Another interesting thing to consider with this coverage is that it, like most whole life insurance policies, builds cash value over time. This allows you to borrow against the policy if you have a financial emergency, such as medical expenses, but also ends your premiums when you turn 95.

While building cash value over time can be beneficial, with a policy this small and premiums this high, you’re better off investing your money elsewhere. 

AARP Premiums and Riders

AARP’s whole life insurance policies also come with an accelerated death benefit rider and a waiver of premium rider. The former allows you to access up to 50% of your death benefit while you are still alive, if you’re diagnosed with a terminal illness. If you are in this predicament, give us a call. Accessing up to $25K may not be enough to cover your expenses, and we can help you figure out additional options.

AARP’s waiver of premium rider means you can stop paying premiums if you come down with a disability or illness that requires you to be placed in a nursing home.

Your premium will only be waived if you have been in a nursing home for at least six months. Your premium will be waived until you are 80 – and will only be waived until the *end* of your nursing home stay.  

AARP also offers guaranteed acceptance whole life insurance, which offers benefits between $2,500 and $25,000, as well as the AARP Young Start Program offering life insurance on children up to 18 years of age.

AARP with New York Life: Ask The Right Questions

If you are thinking of going with this option for your life insurance, you should pay careful attention to the reviews. A.M. Best gave New York Life a superior (A++) rating. However, their program with AARP is less-than-stellar when it comes to how they handle claims. 

Filing a claim once a policyholder passes away is, typically, a simple process, but with AARP life insurance, there are clauses that allow the company to investigate the death, and, in some cases, contest the circumstances.

These policies target seniors, and a significant number of policyholders do pass away within that 2-year time period. Hence the reviews from beneficiaries, claiming challenges receiving their benefits. 

Fortunately, there is a simple fix for this: ask the right questions and answer your application questionnaire as accurately as you are able. We always recommend giving your beneficiaries a copy of your payment records and the policy itself.

If you’ve purchased a policy from AARP and are confused about any aspect of the policy – or are looking to switch to a policy with a larger benefit and lower premiums – give us a call today.