AI-generated editorial illustration

When Colonial Penn Premiums Exceed the Payout

Opinion by Marvin Willis

Publisher, Hill Country Visitor Magazine

Colonial Penn's advertised $9.95 monthly price may sound affordable. But the real question is how much coverage that payment buys and how much a person could spend over the years. Someone who lives long enough and continues paying can put more into a policy than the family eventually receives.

That is a serious concern for anyone treating life insurance as an investment. A manageable monthly payment does not, by itself, make a policy a good financial deal.

Colonial Penn sells its guaranteed acceptance whole life coverage in units. Each unit costs $9.95 a month, while the benefit attached to it depends on age, sex and state. Buying more units increases both the premium and the coverage. The advertised price alone cannot tell you the size of the eventual check. [1]

Consider a man buying at age 69. Choice Mutual publishes a comparison chart showing $724 in coverage for one $9.95 unit. Choice Mutual is an independent insurance agency that markets competing policies, so its chart should be treated as a comparison figure, not a personal quote. Colonial Penn's actual quote and policy determine the coverage available to an individual. [1, 2]

Using that published figure, ten units would provide a $7,240 full death benefit for $99.50 a month. Twelve monthly payments would total $1,194. Here is what continued monthly payments would add up to.

Years paying	Total monthly premiums	Full death benefit
5 years	$5,970	$7,240
6 years	$7,164	$7,240
10 years	$11,940	$7,240
15 years	$17,910	$7,240
20 years	$23,880	$7,240

Illustration based on the published comparison figure above. Author calculations using monthly payments.

After 73 monthly payments, the buyer would have paid $7,263.50, already exceeding the $7,240 benefit. After ten years, premiums would exceed the benefit by $4,700. After twenty years, the difference would reach $16,640.

These calculations assume continuous monthly payments at $99.50, an unchanged $7,240 benefit and no policy loans or other adjustments. They compare dollars paid with the stated death benefit; they do not measure the value of protection received while insured. Different payment schedules or policy terms can change the totals.

In my view, paying $11,940 over ten years for a $7,240 death benefit is an unattractive investment outcome. Buyers deserve to see that possibility as clearly as they see the monthly price.

The timing of death also matters. In this example, someone who dies after three years would have paid $3,582. A qualifying claim for the full $7,240 benefit would give the family more than the premiums paid. Guaranteed acceptance can also matter to someone whose health makes other coverage difficult to obtain. That is the financial protection a buyer is purchasing. [1]

Colonial Penn discloses a two-year limited-benefit period. Buyers should obtain a written explanation of what is payable during those first two years, including the rules for different causes of death. It would be a mistake to assume that every death qualifies for the full advertised benefit from the first day. [3]

The policy also builds cash value, which deserves consideration when assessing its overall value. Cash value is not the same as a promise to refund every premium. Ask for the guaranteed cash-value and surrender-value schedules. Colonial Penn says unpaid policy loans and interest are deducted from the death benefit. [4]

Saving the same $99.50 each month would accumulate $11,940 in ten years before interest or withdrawals. Savings, however, would start small and would not immediately provide the full insurance benefit. The decision depends on the protection needed now, existing savings and the actual policies a person qualifies for.

Before buying, request the exact death benefit, the total premiums over five, ten and fifteen years, how long payments are required, and what happens if payments stop. Compare those answers with other available coverage. The National Association of Insurance Commissioners advises consumers to examine future policy values and warns that replacing an existing policy can be costly. [5]

Families buying final-expense coverage deserve to know when their payments could overtake the promised benefit. An affordable monthly payment can still become an expensive lifetime commitment.