Choosing the Right
Insurance Company
Once you have a Whole Life Certified specialist, the next step to setting up your properly structured, optimally funded whole life insurance is to pick a company with which to purchase your policy.
First, understand that there are two types: stock life insurance and mutual life insurance companies. As the name would imply, stock life insurance companies trade on the stock market, just like any other public company.
Mutual life insurance companies, on the other hand, do not trade on the stock market. There isn’t a stock to buy or you can’t own them in a fund inside of your whole life policy because they have no shares.
For good reason, a participating mutual insurance company is my preferred of the two. Stock life insurance companies, while they want their customers to be safe, also want to give their stockholders higher returns on their investments or split dividends between stockholders and policyholders.
In participating mutual life insurance companies, on the other hand, policyholders are owners, not stockholders. Profits are not split with any outside shareholders. While they still generate profits, stability and safety are the ultimate goals—and all the profits go to the owners, the policyholders.
Participating mutual life insurance companies are among the oldest companies in America. The average age of the top thirty-five life insurance companies in the country is over 100, the oldest being 184. Nineteen of the top thirty-five have been in business for over a century.
As these numbers would indicate, these companies are stable. Statistics drive the profits; as long as the equation is correct, these companies make predictable profits. A very small allocation of their accounts goes to the stock market, so their value isn’t as volatile as the stock exchanges.
And again, since there are no shareholders, Wall Street analysts and money managers cannot pressure these companies into making short-term, shortsighted decisions. Therefore, they are free to pursue long-term strategies and can be managed conservatively. They don’t use margin and leverage, and they generate large amounts of cash that they pay out every year in large dividends.
Here are some other factors to consider
When choosing your insurance company:
A Ratings
The company must have A ratings across the board, with Moody’s, A.M. Best, Standard & Poor’s, etc. Choose a top ten participating mutual insurance company.
100+ Years Old
Look for companies that have been around for at least a century.
Solid Dividend History
Make sure the company has paid dividends every year, including during world wars, recessions, depressions, etc.
Loan Provisions
Make sure that there is a fixed interest rate option.
Convertible
Make sure that the company’s term insurance rates are competitive and convertible to whole life.
High Early Cash Value
Make sure that your policy can be designed to allow for a high cash value as quickly as possible.
No Barriers for Overfunding
Make sure that there are minimal fees, expenses, or other obstacles standing in the way of easily overfunding or overpaying your policy.
The companies that meet all these criteria include:
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