A few years ago I shopped for final expense life insurance just to see what was available and being pushed. I knew there was a propensity in the industry to push some really overpriced, under guaranteed products as senior life insurance.
I just wanted to experience first hand how bad these products were and how hard these companies would push in order to close the deal, and one of my pet peeves, how obnoxiously persistent the companies would be in pursuit of the sale. I was a spry 54 years old at the time and went straight to the household name of household names for final expense life insurance, AARP/New York Life. I decided to apply for $50,000 of 5 year term insurance, their signature no exam product. I completed an application and was approved within a few days at a price of just over $50 a month.
This was where I ran into the first real head scratcher, and frankly troubling feature of their 5 year term product. In the real world a 5 year renewable term insurance would have gone in force at age 54 for $50 a month and would have remained at $50 a month until age 59, five years. But with New York Life they mean the rate changes every 5 years as in, every age that ends with a 0 or a 5. So, at age 55 my rate would have gone up to $75 a month.
So, let’s lend this some perspective. If at age 54 I had applied for $50,000 of traditional (exam required) life insurance and was approved at a standard rate, a worse rate class than the average 54 year old would qualify for, I could have had $50,000 of 20 year level premium term for $35 a month. I could have locked in a level rate for 30 years for $56 a month or a level rate for life of $67 a month. So, at age 55 with AARP my rate would have already jumped to a rate higher than a lifetime guaranteed level premium with traditional insurance.
And get this. At age 60 New York Life’s rate would go to $108. At 65 it would go to $143 and at age 70 it would go to $207. At age 75, about the time life insurance really starts seeming relevant, I couldn’t get it anymore through my senior advocacy organization, AARP. At that point I would have to go to a non guaranteed whole life insurance policy at a premium of $462 a month. $462 a month versus the $67 a month if I had applied for a traditional life time guarantee product.
What if I had just blown off applying for anything at age 54 and suddenly at age 75, an age where you need to know that a standard rate is still very achievable, I come to grips with the fact that a final expense life insurance policy might be a good idea. If I applied for a life time guaranteed level premium policy at that point and was approved at standard, the rate would be $217 a month, less than half of New York Life’s non guaranteed rate. Please understand that when I say their rate is non guaranteed, they have the contractual option to raise that rate at any anniversary of the policy.
Are you outraged? Would you rip the head off of some schmuck life insurance agent that sold something like the AARP product to your parent? I’ve been in this business a long time and for the life of me I can’t figure out why New York Life is allowed to offer such a terrible product.
Bottom line. Just in case anyone thinks I just have it in for AARP, think again. When you are over 50 life insurance becomes a game for a lot of companies. They want your business and they want you to believe that not going through an exam is important to you. Try any final expense or burial life insurance company you want. If that is what they are experts at, they are after money you don’t need to be spending.
By the way, four years later I am still getting letters asking if I want to accept my approved AARP life insurance. A monthly reminder that they haven’t forgotten about me.