Colonial Penn Life Insurance Review

Pros Explained

• Guaranteed-issue coverage available: Colonial Penn provides whole life coverage with no health questions or physical exam required, which may appeal to applicants who would be turned down for other types of coverage. Only about one-third of the insurers we reviewed offer this type of coverage. 
• Same-day decision: In most cases, you can get an answer about whether your application was accepted the same day you apply. 
• Online quote and application platforms: Customers can request quotes and submit policy applications online.
• Live chat: Colonial Penn customers have access to real-time chat with policy specialists. 
  

Cons Explained

• Few policy types available: Colonial Penn’s life insurance offerings are limited to two types of whole-life policies: a low-coverage traditional whole-life policy and a guaranteed-issue policy. 
• High number of customer complaints: Colonial Penn received an average of three times the annual number of customer complaints expected for a company its size over a three-year period.
• Low maximum coverage amount: Colonial Penn’s traditional whole life policy coverage is capped at $50,000. In contrast, most of its competitors offer at least $200,000 in maximum coverage, while several are in excess of $1 million or uncapped.

Complaint Index

Colonial Penn received an unusually high amount of customer complaints for a company of its size, compared to competitors. We base that on information from the National Association of Insurance Commissioners (NAIC). It tracks customer complaints and uses those numbers to create its Complaint Index, which compares companies of similar sizes by the number of complaints filed by policyholders.

An insurance company is assigned a number based on how many customer complaints it receives in a given year, whereby 1.0 represents the expected number of complaints based on its size. A company with the expected number of complaints is given a complaint index of 1. A number less than 1 means the company received fewer complaints than expected, while a number greater than 1 means it received more. An index of 2, for example, would indicate twice the expected number of complaints.

In 2022, Colonial Penn’s NAIC average index was 2.98, meaning that three times as many complaints were lodged against it as a company its size should receive. This number denotes customer satisfaction well below the industry average. (For context, most of the best life insurance companies have an index below 1, and only eight other companies among the 91 we researched received an index average worse than Colonial Penn’s.)

Third-Party Ratings

Colonial Penn fares better when it comes to financial strength ratings provided by AM Best. The credit rating agency has a grading system for indicating the ability of a life insurance company to pay claims. Grades range from A++ to D. In 2022, Colonial Penn received an A rating, indicating an excellent though not an exceptional level of financial strength. Some 90% of the companies we reviewed received a higher grade than Colonial Penn from AM Best.

Policies Available

Colonial Penn currently offers two whole life insurance policies, neither of which requires a medical exam. These are described below.

Whole Life

Whole-life insurance pays a benefit to beneficiaries when the policyholder dies. It is guaranteed to remain in place for the insured’s entire lifetime if the premiums are paid. Over time, the policy builds cash value, which the insured can borrow against as necessary. Premium rates are locked in for the life of the policy.

Permanent Whole-Life Insurance: Although this is a traditional whole life policy, it does not require a medical exam. However, with this policy, applicants are required to answer health questions to determine eligibility. The policy can be used to supplement existing insurance coverage, is capped at $50,000, and can be issued from the ages of 40 to 75. Rates are locked in for the duration of the policy, and cash value begins to accrue after the first year.

Final Expense or Burial Insurance

Guaranteed-issue policies are a type of whole life insurance that doesn't require you to take a physical exam or answer medical questions. As long as you fit the age requirements, you’re guaranteed coverage. However, these policies have a graded death benefit, which limits the death benefit during the first two years of coverage to a return of the premiums you paid plus a small percentage. 

Guaranteed Acceptance Whole-Life Insurance: Colonial Penn’s guaranteed-issue policy is available in most states to applicants between the ages of 50 and 85. After the first year, the cash value begins to build, but there is a two-year waiting period before full benefits can be paid unless the death is from an accident. During this time, beneficiaries will receive a return of the premiums that you had paid plus 7% if you die of natural causes. This policy is best suited for people with preexisting health conditions who might not be eligible for traditional policies. Healthier individuals can likely get a less expensive policy elsewhere by undergoing a medical exam.

Available Riders

Riders are provisions in an insurance policy that extend protection or provide additional coverage. Colonial Penn’s riders cost extra on top of any regular policy premium. However, they can also be purchased on their own.

Living Benefit Riders

Marketed as “Living Insurance,” Colonial Penn’s life insurance riders provide what is called accelerated death benefits. These enable policyholders to access up to 50% of the face value of their policy while they are still alive in the event of a qualifying health event. The election of one of Colonial Penn’s living benefit riders increases the premium, and riders are subject to administrative fees and partial repayment of any policy loans or interest.

• Heart Attack or Stroke: This is similar to critical illness riders offered by other companies. It provides up to 50% of the death benefit upon diagnosis of a heart attack or stroke. 
• Cancer: This is another type of critical illness rider. It provides up to 25% of the death benefit if you’re diagnosed with cancer (except skin cancer).
• Chronic Illness: This is both a chronic illness and a terminal illness rider. It provides up to 50% of death benefits if you are diagnosed with a qualifying chronic or terminal illness.

Customer Service

The Colonial Penn website can be accessed anytime at colonialpenn.com. Sales assistance (877-877-8052) is available Monday through Friday, from 8:30 a.m. to 10 p.m. ET, and on Saturday from 9 a.m. to 5:30 p.m. ET.  A policy service hotline (800-523-9100) is open Monday through Friday, from 8:30 a.m. to 5:30 p.m. ET. (Please note that New York residents must use different numbers.)

Real-time online help can be reached via the website’s pop-up chat window, or through the website’s “Chat With A Specialist” banner. Customers can get quotes or file applications online but must send downloaded claim forms through the mail.

Who Is Colonial Penn Best For?

Colonial Penn was among the first insurance companies to offer guaranteed-acceptance life insurance policies to customers aged 50 and older. However, because this kind of coverage has low coverage limits and is more expensive than policies that require an exam, it is best suited to people with preexisting health conditions who may not be eligible for traditionally underwritten policies. It may also be useful for those seeking to supplement existing coverage.

Final Verdict

Colonial Penn's guaranteed-acceptance policies could be useful if you are looking for whole-life insurance that doesn't require a medical exam. However, with the higher-than-average customer complaints and low max coverage amounts, you may want to seek quotes from other companies as well.

Methodology

We designed a comprehensive ranking methodology based on consumer priorities and life insurance company fundamentals to rank more than 90 insurers across five general categories: financial stability, customer satisfaction, product, and feature variety, the overall buying experience, and cost.

In order to do this, we collected over 5,000 data points and scored each company based on 55 metrics. We grouped metrics by category to see how insurers performed in each; we then weighted category scores to determine how companies performed overall.

Frequently Asked Questions

Does Colonial Penn Pay Out?

Yes, Colonial Penn pays out on life insurance claims. However, the amount the beneficiary receives will depend on whether premiums were paid in full and what kind of policy you have. For instance, there is a graded death benefit on guaranteed-issue policies, with the beneficiary receiving the amount of premiums paid plus 7% interest if the policyholder dies within two years (unless the death is accidental). After the two-year waiting period, beneficiaries receive the full death benefit.

What’s the Rating on Colonial Penn Life Insurance?

Colonial Penn Life Insurance received an "A" (Excellent) rating from AM Best, indicating financial strength and a historic ability to pay its claims obligations. It received an A- rating from Standard & Poor's, an A- rating from Fitch, and an A3 rating from Moody's. Its outlook is stable.

Can I Cash Out My Colonial Penn Life Insurance Policy?

Yes, you can cash out your Colonial Penn life insurance policy if you wish. When you cancel your insurance, Colonial Penn will cut you a check for the cash value of your policy, paid in a lump sum. Keep in mind that if you haven't had your policy for very long, it won't have gained much value.

Can You Cash in Life Insurance While Still Alive?

There are a couple of ways to cash in your life insurance before death. One way is to surrender your policy and receive the cash value. Another way is to use a living benefit rider if you've purchased one. These policy add-ons allow you to receive a portion of the death benefit if you receive a certain diagnosis such as cancer.