AARP Has A Policy for You! (or maybe not). The American Association of Retired Persons (AARP) is America’s largest nonprofit organization with millions of members. The AARP is in the news for its lobbying efforts on behalf of senior citizens, advocating legislation to make their lives easier and their healthcare more affordable. What many people do not know is that the AARP is the source of numerous discounts for its members. These can be travel, entertainment, healthcare, and insurance. We want to take this opportunity to discuss that last benefit of AARP membership.
AARP offers a final expense, or burial insurance policy for its members. It should be no surprise because the members are older citizens, and burial insurance is something many think about. One problem we notice is that too often, people will allow the name and reputation of an organization to influence their decisions regarding insurance. That can be a problem because the status of a nonprofit organization does not mean that its products are above investigation or criticism.
AARP Does Not Sell Its Insurance
The AARP does not sell its insurance policies. It was never an insurance company, and it does not pretend to be one. The insurance products it recommends to its membership are offered by New York Life Insurance, which has the rights to underwrite any AARP life insurance contract. This is nothing new because there is another insurance company that handles the auto insurance endorsed by AARP, and a third provider handles the healthcare insurance. All these companies pay AARP for the privilege of offering their products to the millions of AARP members nationwide.
New York Life Insurance Company is not a minor player in the insurance industry. The company has an A.M Best rating of A++ and has been selling insurance products since 1845. It is registered to sell insurance in every state, and the partnership they have with AARP is like the relationships New York Life has with other organizations.
We point this out to assure you there is no need to worry about New York Life Insurance not being able to pay out a benefit.
The concern we have is with the products offered to AARP members (like you may be) must be a dues-paying member of the AARP to apply for the burial insurance policy.) We believe that too many people purchase insurance products because of AARP’s overall reputation. They are not doing the proper due diligence a consumer must perform. The buyers are not investigating the policies carefully.
The Insurance Policies Under the AARP Banner
Let’s look at these insurance products:
1. A Simplified Issue Whole Life Insurance Policy.
This policy has a face benefit of up to $50,000. AARP members can apply for a policy if they are between the ages of 50 and 80 years of age, and it is available in all states. The monthly premium will not increase, the death benefit never decreases, the policy will never expire whatever the age of the insured, and the coverage will go into effect on the first day.
As you guessed, this sounds very simple and doesn’t appear to have any difficulties. There is a catch to this insurance.
It is with the health questions that are asked. Anyone who applies for this policy will be asked if he or she has been diagnosed with having heart trouble, cancer, stroke, diabetes that needs insulin, and immune system disorders, among other conditions. The applicant will be asked if the diagnosis or any treatment took place in the prior 24 months.
You will also be asked if, in the past 24 months, you were admitted to a hospital or other healthcare facility for any medical condition. A final question will be whether or not in the past 90 days, a person had treatment, diagnostic tests, or medication of any type. The individual’s medication history and MIB file will also be investigated.
What this all means at the bottom is that most senior citizens cannot qualify to get this policy due to their medical conditions. That may not be such a bad thing because this whole life insurance policy is rather expensive.
2. AARP Guaranteed Life Insurance
This is a whole life insurance policy that is available in all states except Washington and New Jersey. It is available to anyone who is an AARP member and who is between 50 and 80 years old. We admit that there are some attractions to this product.
- No matter what your age is, this policy is not going to expire
- The death benefit is not going to decrease
- The premium paid is set for the life of the policy
- No health questions are asked. This is extremely appealing to any senior citizen who has some health issues.
It is all well and good, but there’s one other feature to the guaranteed life insurance policy that you ought to stop and think about.
There will be no death benefit except for accidental death during the first 24 months that the policy is in effect. The amount your beneficiaries will receive is 125% of the premium you already paid.
We want to point out that any guaranteed acceptance policy offered by an insurance company is going to have a 24-month waiting period before death benefits are paid out. It reduces the risk for the insurer, and anyone buying a guaranteed acceptance life insurance policy must keep that in mind. If you are as healthy as a horse, there is no problem.
So, what is the big difference between what AARP and New York Life Insurance offers and some other insurance companies?
Cost. The New York Life Insurance policy is more expensive than similar burial insurance policies offered by other companies. You are paying more for a product that costs less elsewhere.
This is why it is so important to do a little shopping for that burial insurance policy. You can find another guaranteed whole life insurance policy, with the same type of benefits, at a lower price.
3. Level Death Benefit Term Life
This life insurance policy is the crown jewel of the AARP offerings. It can have a face amount of up to $100,000, and it is available to AARP members in all states. You need to be between the ages of 50 and 74 years, and spouses can also apply if they are between 45 and 74 years of age. The Level Death Benefit Term Life Insurance Policy is prominently featured in AARP advertising. Is there any problem with this coverage? Yes, there is.
It is a term life insurance policy, and this means the coverage has a termination age. That might not seem to be a problem until you find out that the termination age is 80. Coverage ends when you celebrate your 80th birthday, and you do not get back any of the premium dollars paid. The only way to get burial insurance at that point is to buy a whole life policy. It is going to be rather expensive because of your age.
There’s a little bit of deception practiced in advertising this policy. The AARP and New York Life Insurance clearly state the policy coverage cannot be canceled without your consent if you pay the premiums; your health is not a reason for cancellation. They will mention the termination age at the end of the promotion. It is assumed by that time you already are willing to buy the policy.
The amount of the policy is almost irresistible for senior citizens. The possibility of having up to $100,000 of coverage for burial insurance seems virtually irresistible. When you consider that increasingly more people are living into their 90s, this policy has a very low termination age.
Another problem is the expense of the premium. The premium increases in five-year increments; you are buying a policy that will increase in cost, and the benefit will vanish when you reach 80. There are other reasons why this insurance policy is not a very good idea.
AARP uses a little sly marketing in the title of this policy. It is called a level death benefit, and it suggests that the amount of the benefit paid to survivors will never change. That is true for practically all term life insurance policies; the amount of the final benefit does not change for the life of the policy. The insurance industry will customarily use the word “level” to show that the premium is fixed for the entire life of the policy. That is not true with the AARP/New York Life Insurance product. We already mentioned that the level death benefit term life insurance policy’s premiums are going to go up over time.
Marketing Can Be an Effective Disguise
The AARP and the New York Life Insurance Company are not doing anything that is illegal. What they are doing, instead, is employing some rather ingenious advertising. We are recommending that folks look beyond the words.
It is the reputation of an organization that happens to be the primary selling point of all these policies. AARP offers its members all kinds of great discounts on other services and products. We suspect that many AARP members do not shop around for insurance because AARP is endorsing the New York Life Insurance policies. Granted, there are many advantages to being a member of AARP, but it doesn’t by itself guarantee you are getting the best insurance policy for the money you will pay.
Burial insurance is a very sensitive topic for many people. Older customers want something that will help their beneficiaries pay off any funeral expenses, but, at the same time, the whole process reminds them of their mortality, and that time on earth is growing short. AARP is a trusted organization, and many people who are AARP members think it is easier to buy an AARP endorsed policy than trying to hunt down something better.
Don’t Hesitate to Seek Help
We agree that it is not easy for someone who is not an insurance professional to find similar policies and make a comparison. A consumer is better off having an insurance agency do the heavy lifting. A reputable agency represents several insurance companies and can do the search needed. The same agency is ethically bound to tell a person if they can offer a policy that is better and/or cost less than what AARP is recommending.
If you’re in the market for a burial insurance policy, we ask that you consider looking at our services. We represent several reputable insurance companies that can provide the burial insurance you need at a premium you can afford. We believe that one of our companies can give you excellent burial insurance coverage that is much better than what AARP and New York Life Insurance Company are offering.
A smart consumer is going to look around to find the best possible deal and not be swayed by an organization’s reputation. The devil is in the details of the AARP policies. Too many people are mesmerized by having the AARP endorse the New York Life Insurance policy. Both are very reputable and respected, but what they are offering to the AARP members is insufficient burial insurance that costs more than the real value. We know we can find something better for you.
Insurance for Final Expense represent several insurance companies that offer burial, or final expense, insurance. These companies can provide the kind of coverage they are looking for at very reasonable prices. Some of these premiums, in fact, offer the same amount of benefit as the AARP / New York Life Insurance Company policies. The difference is that they will cost you less. The terms of the policies are also transparent. We choose to work with insurance providers who rely more on the quality of a product than turning a phrase in marketing.
We are more than willing to explain any insurance policy to anyone. We think a consumer must know what he or she is buying before they start paying out premiums. Senior citizens must be careful with their money, and we respect that. We don’t think that driving a hard sales pitch is the way to help someone. If a policy does not look like it will give the desired coverage, we will not try to promote it. The policyholder is the most important person in our eyes. You don’t have to take our word for that; ask anyone who has done business with us in the past and what they think about our commitment to integrity.
If you want to find out more about our agency, please feel free to contact us at your earliest convenience. We are willing to sit down with you and discuss what we can do and what alternative insurance we can find for you that provides better coverage at a far more reasonable price.
Gary P. Cubeta
(Serving Americans In All 50 States)