An atomically thick AlN layer is typically used as the strain compensation layer (SCL) for InGaN-based-red light-emitting diodes (LEDs). However, its impacts beyond strain control have not been reported, despite its drastically different electronic properties. In this Letter, we describe the fabrication and characterization of InGaN-based red LEDs with a wavelength of 628 nm. A 1-nm AlN layer was inserted between the InGaN quantum well (QW) and the GaN quantum barrier (QB) as the SCL. The output power of the fabricated red LED is greater than 1 mW at 100 mA current, and its peak on-wafer wall plug efficiency (WPE) is approximately 0.3%. Based on the fabricated device, we then used numerical simulation to systematically study the effect of the AlN SCL on the LED emission wavelength and operating voltage. The results show that the AlN SCL enhances the quantum confinement and modulates the polarization charges, modifying the device band bending and the subband energy level in the InGaN QW. Thus, the insertion of the SCL considerably affects the emission wavelength, and the effect on the emission wavelength varies with the SCL thickness and the Ga content introduced into the SCL. In addition, the AlN SCL in this work reduces the LED operating voltage by modulating the polarization electric field and energy band, facilitating carrier transport. This implies that heterojunction polarization and band engineering is an approach that can be extended to optimize the LED operating voltage. We believe our study better identifies the role of the AlN SCL in InGaN-based red LEDs, promoting their development and commercialization.