AARP offers guaranteed acceptance life insurance plans and often states their plans have no premium increases for the life of the policy. Just how accurate are those claims? What are the pros and cons of AARP permanent life insurance plans? Is there a better deal out there for seniors?
AARP Permanent New York Life Insurance
AARP does not directly sell insurance policies to its members. AARP is an umbrella group that offers members benefits for a number of contracted services, including auto insurance, health insurance, life insurance, and more. That means you’ll be working with a third party, not directly with AARP.
New York Life administers all AARP policies, so AARP policies are technically New York Life policies. With nearly 40 million members, New York Life has access to a large pool of potential clients. AARP gets royalties from New York Life for each member who buys a policy.
A permanent life insurance plan grows in cash value over time. If you have a policy and die, the value of the policy is paid out to beneficiaries you select. If you outlive the policy term, the cash value is paid out at the end of the term.
The permanent life insurance policy offered through AARP comes with some of the following features:
- Coverage ranging from $10,000-$100,000
- Guaranteed acceptance for those between ages 50-75
- Coverage for AARP members’ spouses between the ages of 45-74
- No medical exam required prior to acceptance
- Affordable premiums
Only AARP members and spouses can apply for an AARP life insurance plan. Applying is as simple as providing basic contact information, answering three medical history questions, and permitting AARP/New York Life to independently verify that information.
Pros and Cons
AARP frequently touts guaranteed acceptance, low rates, and no premium changes for the same amount of coverage over the life of a policy. These claims are misleading.
AARP boasts guaranteed acceptance with no medical exams, but New York Life still closely examines a potential member’s medical history. Those who have had a long medical history with complications from certain diseases will be denied coverage.
AARP premiums are affordable and often competitive. However, that does not mean their price is always the lowest, or that their plans offer the greatest value for the total paid.
Finally, it is impossible for AARP to ensure that premiums will never change. If the cost of covering its insured members goes up, New York Life will raise premiums because it is a business.
For some, AARP offers great benefits. Those in good health and with healthy finances can get great value from AARP. Additionally, AARP’s insurance underwriters are well-vetted providers with solid financial standing, which means that members don’t have to worry about dealing with shady insurance providers that might not be there in the future.
Before investing in any insurance plan, seniors should weigh other options. Shopping around can help you get the best deal and ensure you've invested in the right type of insurance for your needs.
A number of plans may be good choices, depending on a senior’s needs. An independent insurance agent can help you compare plans. You can often find these options with premiums lower than AARP’s rates.
- Term life insurance: These policies offer coverage for a specified term. They pay a death benefit if you die during the covered term, but do not offer a payout when the policy expires. Premiums for these policies are the lowest available, but there is no cash buildup over time. If the term expires, the coverage ends.
- Guaranteed universal life (GUL): These policies build on the coverage of a term life policy. Universal policies generally offer a death benefit to beneficiaries, but also provide policy holders with a cash investment option that grows with the plan.
- Whole life insurance: These policies cover a policyholder for as long as they are alive. The premium for the policy and the death benefit are set at a specific rate for the life of the policy and will not change. Whole life insurance offers both a death benefit and a cash investment. You can even borrow against the policy.
Which One is Right for You
In the end, the policy that works best is up to the individual. An independent insurance agent can help clients determine which policies will best suit their needs. A couple with solid investments that pay healthy dividends each year might choose term life coverage that provides a simple payout to help cover funeral expenses. A couple with less reliable retirement investments or health issues might choose a universal or whole life plan that offers a guaranteed payout with cash investment. An independent agent can help evaluate your age, health, and financial standing and assist in choosing the right plan to fit your life.