I feel like this is a factual question but since I haven’t been able to find a definitive answer with the trusted google, I’m starting to wonder! Please move if applicable, mods.
So the AARP sends out a mailer to someone approaching 50, advertising “no exam” life insurance for members. It stresses the insurance is not available to nonmembers and that approval is based on answers to only 3 health questions. Assuming negative (favorable) answers to those questions, is this legit? Do other legit companies offer anything similar? If someone was honestly diagnosed with one of the maladies in the 3 questions sometime after obtaining the policy would it be canceled or premiums just go up? Any insider info on this from someone in the insurance field would be greatly appreciated. Seems like there’s a lot of sketchy info out there on this subject.
By the way, I attempted to do a search for similar questions before starting a thread but the search function just returns a totally blank page for me.
It’s legit. There are a couple of different companies offering such policies. But they sell their insurance in units and it’s expensive as hell, especially if you want a benefit of anything of real value. And I think the most you can get is something like 25-50K worth.
Depending on the company the 3 questions can be as benign as “what is your age, what is your gender, how much coverage do you want” or it can be something about aids, kidney, disease, or stroke/heart conditions.
The accidental death insurance policies aren’t very expensive. But they don’t cover much
I did a quote for the Colonial Penn policy. I’ll be 55 in October:
**Benefit ** / **Monthly Premium**
1 Units $1,562 $9.95
2 Units $3,124 $19.90
3 Units $4,686 $29.85
4 Units $6,248 $39.80
5 Units $7,810 $49.75
6 Units $9,372 $59.70
7 Units $10,934 $69.65
8 Units $12,496 $79.60
$955.20 a year for 12.5K benefit is insane. I pay not even half that per year for a quarter million policy. I have another policy thats worth $125K I pay $96 a year for (albeit it is a group policy I carried over from where I retired from).
Point is, these policies are for people that can’t get life insurance otherwise and expect to die soon after the 2 year waiting period. Honestly, $12,496 isn’t very much to leave your family with. It’ll pay for a decent funeral I guess.
Is it for a lump sum on death, with a fixed premium? I’ll assume so. I’m much more familiar with the UK, but the principles, if not individual products, are the same.
Actuaries figure this stuff out all the time - they know pretty accurately how many people (over a large population) of age x are likely to survive to age x+1, so they can set premiums for a certain payout, and have a very good chance that a profit will be made for the provider. For you as the individual policyholder it could be that you pay in for two years and your estate wins, or you could pay in till you are 110.
The AARP seems like an org with lots of members that people have to join, so the actuaries will have more data to play with - they’ll know where members tend to live etc Remember that they are not focusing on individuals, it’s populations.
So if you can honestly answer the three questions in the negative, you are just part of a big pool of risk. This kind of policy is commonly offered - a standard life assurance product. If the US is anything like the UK this kind of over-50 policy only offers fairly small sums assured - it’s the sort of thing used to cover funeral expenses
And it’s for people who can’t get insurance otherwise. For a 55 year old male $955 a year is crazy for the chump change of 12K. Nobody that can get insurance elsewhere would pay that.
The insurance is only for people older than 50. I assume somebody who is 50 years old and doesn’t have life insurance either has always had a pre-existing condition, or is very irresponsible.
I don’t know about that assumption. I’m sure it applies in some cases but there are other reasons someone may be 50 (or older) and not have life insurance. Like being unemployed or otherwise having no or minimal income and also not having had any option to keep life insurance they may have once had with a former employer. You may disagree but I don’t see that as irresponsible.
Thanks, to you and others who replied. I’d have to agree that this type of insurance product is probably suited only to those who can’t otherwise get covered. FWIW, regarding amounts, the AARP policy I mentioned earlier was for up to $150,000. More than some here suggested, but obviously nowhere near the sizable policies available in other circumstances and for less money. I mainly wanted to know if there was any other “catch” besides the fairly apparent drawbacks of these policies, as I have known more than one person who mentioned to me having been pitched them.
You’d be surprised at how many people are in their adult years, insurable, married with kids, gainfully employed, and no life insurance. In that case there is no word for it but irresponsible.
Another word for it is “wealthy.” Life insurance is often not a concern if you know that your heirs are not going to have any trouble paying the bills when you’re gone.
I’m not talking about rich people. I mean middle class folks that never bought life insurance and then they get to be my age and go “oh, shit. I’m not going to live forever or become a millionaire, am I!”.
I don’t have life insurance. I did when I had kids and a mortgage, but the kids are grown up and the house paid for. There are funds available to pay for funerals and my wife gets half my pension, when I pop my clogs, to add to her own. Why am I irresponsible?
Some people simply prefer putting money into assets, rather than insurance. It’s really not irresponsible if you’re good at it. I know several people who loath the insurance companies and think the whole industry a big scam! So, instead they spent that money acquiring buildings and property. Which, if you look at what you pay in life insurance over a lifetime, is totally doable. Like all good things it requires discipline. They have wives and children and a mortgaged home, but if they dropped tomorrow their family would have sufficient assets to be fine.
AARP, or any other big organization, has no interest in being connected with a scam. So yes, it’s legit. The quality of what’s being offered may be another matter.
LIMRA is a good resource for life insurance and financial information.
Daytime TV in the UK is full of adverts for this kind of product. But unless you’re actually likely to make more from the guaranteed sum than you pay in, it’s more of a savings product than insurance, and there may well be better returns elsewhere.
They get well known older actors and TV presenters to endorse products that I bet they (or their financial advisors) wouldn’t touch with a bargepole.
It’s not hard to do the sums and easy to see that most people (as they must for the scheme to make a profit) will put more in than their heirs will get back. Far better to put the money in tax exempt savings.
In the US that would be called whole life insurance. Most responsible financial advisers think that whole life is not a good thing to buy.
There is also cheaper (premiums 50% or less than whole life) life insurance that people buy only during their working years meant to provide money for your dependents if you die and are no longer there to provide for them. The goal with this type of insurance is to never cash it out and stop paying for it sometime into retirement when your children have grown and your spouse has retirement savings. I assume this is what pkbites feels responsible people need.
Putting money into assets is “saving”. That’s not what insurance is for.
Insurance is for people who think, “I’m going to diligently save (by putting money into assets) every month for the next forty years, and me and my family will have a nice nest-egg at the end of it”, and then promptly die in six months. The insurance provides the nice nest-egg that the diligent saving would have provided had everything gone according to plan.
The insurance ads targeted at retired people to “pay for funeral expenses”, are mostly just “pay for your own funeral in installments” plans, not insurance.
Every life insurance policy I know of has a waiting period. 2 years seems to me the norm. If you kick before then your family gets whatever premiums you paid in.
