Top 10 Mutual Life Insurance Companies

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If you are looking to buy a whole life policy that allows you to earn an annual payout, a participating whole life policy might be the right choice for you.

Participating policies are issued by mutual life insurance companies. They are different from traditional whole life policies in the sense that in addition to a guaranteed death benefit and a cash value account which earns interest at a guaranteed rate, they also pay dividends.

In this article, we take a look at mutual life insurance companies, the types of policies they offer, factors to take into account while choosing a company, and the top 10 mutual insurance companies in the industry today.

What is a Mutual Life Insurance Company?

A mutual life insurance company is set up in such a way that the policyholders are also the owners. It is entirely different from a traditional life insurance company, which is either owned privately or by a group of shareholders who can buy and sell the company’s stocks on trading platforms.

Mutual insurance companies tend to be conservative in their approach towards investments. Since their earnings and performance are not scrutinized every quarter, which is the case with publicly traded insurance companies, they only focus on long-term financial goals.

They take fewer risks and are in a much more stable position compared to stock insurance companies.

The biggest advantage of buying a policy from a mutual insurance company is that you can receive a share of the profits the company makes, as and when the company decides to pay dividends.

The best part about the dividends paid by a mutual insurance company is that they are not taxable. You can use the dividends to buy additional coverage on your policy, pay your premiums, repay the loans against cash value (if there are any), or for any other purpose.

What Type of Policies Do Mutual Life Insurance Companies Offer?

Mutual insurance companies – just like traditional insurance companies – offer everything from term life policies to whole life, universal life, universal variable life, and simplified issue policies.

The one specific type of policy that they offer – which other insurance companies do not – is participating whole life policy.

A participating whole life policy has a guaranteed death benefit and a cash value portion which earns interest as long as the policy stays in effect. Apart from this, it offers you an opportunity to earn dividends, which are usually paid out on an annual basis.

It should be noted that most mutual insurance companies do not offer guaranteed dividends. It depends on the profits a company makes every year and the surplus amount it has after settling claims and accounting for administrative expenses.

There are some companies that offer guaranteed dividends. They pay dividends every year irrespective of their performance, market conditions, and expenses.

Participating life policies that pay guaranteed dividends, however, cost more than policies that pay dividends on an optional basis.

Direct Recognition vs. Non Direct Recognition Insurance Contracts

The amount of dividends you receive depends on the type of whole life insurance contract you sign with the company. There are two ways in which mutual insurance companies determine the amount of dividends to be paid for each policyholder – direct recognition and non-direct recognition.

Under a direct recognition contract, the dividends you are paid depends on the amount of money in your cash value account. The more money you have in your cash value account, the higher your dividends will be. If you make a withdrawal from your account or sign up for a loan, the company will reduce your dividends.

Under a non-direct recognition contract, the dividends you are paid are not dependent on the amount of money in your cash value account. Irrespective of the money in your account, you will be paid the same dividends. So, you can make withdrawals or obtain a loan without worrying about the company reducing your dividends.

Let us now take a look at the top 10 mutual insurance companies in the industry today.

The Top 10 Mutual Insurance Companies

MassMutual

Financial Ratings

A.M. Best: A++

Moody’s: Aa2

S&P’s: AA+

Fitch: AA+

Policies Offered

  • Term life (convertible into permanent after expiry)
  • Direct term (online application process)
  • Universal life (death benefit, cash value, flexible premium payments)
  • Variable universal life (death benefit, flexible premiums, different investment options for cash value)
  • Participating whole life (death benefit, cash value, optional dividends)
  • Simplified issue whole life (no medical exam)
  • Guaranteed issue whole life (guaranteed acceptance, no medical exam)

New York Life

Financial Ratings

A.M. Best: A++

Moody’s: Aaa

S&P’s: AA+

Fitch: AAA

Policies Offered

  • Level premium term life (convertible into whole life)
  • Yearly renewable term (convertible into whole life)
  • Standard whole life (death benefit, cash value, and optional dividends)
  • Custom whole life (flexible premium payments, death benefit, cash value, and optional dividends)
  • Value whole life (affordable level premium, death benefit, and cash value)
  • Universal Life (flexible premium payments, death benefit, and cash value)
  • Variable Universal Life (death benefit, different investment options for cash value)

Guardian

Financial Ratings

A.M. Best: A++

Moody’s: Aa2

S&P’s: AA+

Fitch: AA+

Policies Offered

  • Term life (level premium)
  • Whole life (death benefit, cash value, and optional dividends)
  • Universal life (death benefit, cash value, flexible premiums)
  • Variable universal life (death benefit, multiple investment options for cash value)

Ameritas

Financial Ratings

A.M. Best: A

S&P’s: A+

Policies Offered

  • Term life (level premium, convertible into permanent life)
  • Whole life (customized coverage, cash value, optional dividends)
  • Universal life (death benefit, cash value, flexible premiums)
  • Variable universal life (death benefit, multiple investment options for cash value)
  • Index universal life (death benefit, cash value protected from market losses)

Northwestern Mutual

Financial Ratings

A.M. Best: A++

Moody’s: Aaa

S&P’s: AA+

Fitch: AAA

Policies Offered

  • Term life (choose between level premium and increasing premiums, convertible into permanent life)
  • Whole life (death benefit, cash value, optional dividends)
  • Custom universal life (flexible coverage and premium payment schedule, cash value)
  • Single premium universal life (one-time premium payment, tax-free lump sum death benefit)

Ohio National

Financial Ratings

A.M. Best: A+

Moody’s: A1

S&P’s: A

Policies Offered

  • Term life (level premium, convertible into permanent life)
  • Whole life (death benefit, cash value, optional dividends)
  • Universal life (flexible coverage, flexible premiums, cash value)
  • Indexed universal life (death benefit, index linked cash value)
  • Variable universal life (flexible coverage, flexible premiums, multiple investment options for cash value)

Penn Mutual

Financial Ratings

A.M. Best: A+

Moody’s: Aa3

S&P’s: A+

Policies Offered

  • Term life (level premium, convertible into permanent life)
  • Whole life (death benefit, cash value, optional dividends)
  • Universal life (flexible premiums, cash value)
  • Indexed universal life (flexible premiums, cash value linked to index fund growth)
  • Variable universal life (flexible coverage and premium options, multiple options for cash value investment)

Lafayette Life

Financial Ratings

A.M. Best: A+

S&P’s: AA–

Fitch: AA

Policies Offered

  • Term life (level premium, convertible into permanent life)
  • Whole life (death benefit, cash value, optional dividends)
  • Protector 15 whole life (level premium, coverage for final expenses)

Minnesota Life (Securian Financial)

Financial Ratings

A.M. Best: A+

Moody’s: Aa3

S&P’s: AA–

Fitch: AA

Policies Offered

  • Term life (level premium, convertible into permanent life)
  • Whole life (death benefit, cash value, optional dividends)
  • Fixed universal life (death benefit, flexible premiums, fixed interest cash value)
  • Indexed universal life (death benefit, index linked cash value)
  • Variable universal life (death benefit, multiple investment options for cash value)
  • Long term care whole life (lifetime coverage, access to death benefit in case of chronic or terminal illness)

Foresters

Financial Ratings

A.M. Best: A

Policies Offered

  • Term life (level premium, convertible into permanent life)
  • Non medical term life (no medical exam, convertible into permanent life)
  • Whole life (death benefit, cash value, optional dividends)
  • Universal life (flexible premiums, death benefit, cash value)
  • Variable universal life (flexible premiums, death benefit, multiple investment options for cash value)

Factors to be Considered While Choosing a Mutual Life Insurance Company

Stability

How long has the company been in business? What are its financial ratings? These are two important questions you need to ask while looking for a mutual insurance company.

Policies Offered

Make sure the company you choose offers an adequate range of policies, add-ons, and riders that cover your financial needs.

Flexibility

The terms and conditions of the company you choose should be flexible enough to allow you to choose the coverage you require, adjust the premium payment schedule, buy additional coverage if needed, convert a term policy into a permanent policy, and so on.

Direct Recognition vs. Non Direct Recognition

As mentioned above, a non-direct recognition company pays you the same amount of dividends as it pays other policyholders, irrespective of the money in your cash value account. New York Life, Ohio National, and Lafayette Life are some of the well-known non-direct recognition companies.

A direct recognition company, on the other hand, reduces dividends if you have an outstanding cash value loan or have made withdrawals. Guardian, Penn Mutual, Northwestern Mutual, and Ameritas are some of the well-known direct recognition companies.

Buying the Right Type of Insurance Policy

You should choose a mutual insurance company depending on your budget and financial goals. If you want to make full use of the living benefits, look for a company that offers a reasonably high rate of interest on the cash value account and pays dividends regularly.

If you do not care for living benefits and want to bequeath a large amount of money for you beneficiaries, look for a company that offers sizeable death benefits. Simply put, the policy you buy should be affordable (relative to your income level) and ideally suited for your financial needs.

Jonathan Holloway

Jonathan is a licensed life insurance agent at NoExam.com that writes about insurance, personal finance, lifestyle, and sports. See our pages on life insurance and life insurance rates for more.


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