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Top 10 Mutual Life Insurance Companies

Mutual Life Insurance Companies

Mutual insurance companies are a rare breed nowadays. Most companies that were once mutual have switched to stock insurance companies through “demutualization”. In the following article we will touch on the benefits of a mutual insurance company and provide our picks for the best mutual life insurance companies.

Best Mutual Life Insurance Companies

The following list of the top mutual insurance companies focuses on insurance companies that have a mixture of strong ratings and permanent life insurance policies, specifically whole life, universal life or long term care insurance.

Mutual CompanyA.M. Best Rating
American United LifeA+
Guardian LifeA++
Lafayette LifeA+
MassMutualA++
Minnesota LifeA+
Mutual of OmahaA+
New York LifeA++
Northwestern MutualA++
Ohio National A+
Penn MutualA+

Mutual Life Insurance

Of all the benefits of choosing life insurance from a mutual insurance company, in our estimation the greatest benefit is that a mutual company operates for the sole benefit of its policyholders.

…the greatest benefit is that a mutual company operates for the sole benefit of its policyholders.

You see, a stock insurance company focuses on maximizing shareholder value. What is good for a shareholder might not always be good for a policyholder.

Another benefit of a mutual company is that your mutual life insurance is not connected to Wall Street. For many of us that is a relief, as we are constantly inundated with idea that we should give Wall Street all of our money and just hope and pray it all works out.

Mutual life insurance, particularly dividend paying whole life insurance, provides an option outside of the confines of Wall Street.

Best Mutual Life Insurance

Policy design is a huge factor in maximizing your mutual life insurance policy. A policy can be structured in a myriad of ways. The two main focuses of mutual life insurance is on either the death benefit or cash value growth.

Due to the financial strength of most mutual insurance companies, whether you want a policy designed for death benefit protection or cash value growth, choosing a mutual company that focuses on maximizing policyholder value vs stockholder value is a good route to take in our estimation.

About Mutual Insurance Companies

Mutual life insurance companies, AKA “Mutuals”, have no shareholders. Contrast mutual insurance companies vs stock companies, where the company’s focus may be split or may focus more on shareholders, than policyholders.

The mutual company’s policy owners are the corporation’s members, controlling the mutual insurer and giving them rights of membership.

Mutual company policyholder’s membership rights include:

  • Membership rights that are contractual, such as company dividends declared by the board of directors
  • The option to participate in corporate governance, typically by voting for the company’s directors
  • Receipt of any outstanding value in case of liquidation or demutualization of the corporation
  • Members can expect that the corporation’s main objective will be to operate in the best interests of the policyholders
  • Ability to launch legal action against the company’s directors and officers if they violate their fiduciary duties
  • Profits earned by a mutual insurance company must be either kept within the company or distributed to policyholders as dividend distributions or reductions to future premiums.

Mutual Insurance Company vs Stocks Insurance Company

The primary difference between the two types of companies is how they plan for the future. A stock company is looking to maximize shareholder value, so the focus is going to be more tailored to the “what have you done for me lately” operating style. This focus on short term profits may lead the stock company to taking on more risk in the investments it chooses.

In contrast, mutual companies are not critiqued on a quarterly basis, so the focus can be on long term planning, with an emphasis on solid long term investments that have a lower risk profile than those a stock company may choose.

You see, with a stock company, the profits pass on to the shareholders. However, with a mutual insurance company, the profits pass on to the policyholders, such as life insurance dividends.

Life Insurance Dividends

Mutual insurance companies that offer participating whole life insurance have a long history of paying annual dividends. Life insurance dividends are beneficial to policyholders and can be used in a variety of ways.

Dividend Payments Can Be Used For:

  • Cash
  • Premium Payments
  • Paid Up Additions
  • Earn Interest with the Insurance Company
  • Repay Existing Loans

Direct Vs Non Direct Recognition

Among the various mutual life insurance companies one way they differentiate themselves is through direct vs non direct recognition of outstanding life insurance loans.

Non recognition companies pay the same dividend rate, whether or not you have an outstanding loan against your cash surrender value.

Direct recognition companies pay a different dividend rate (not necessarily less) on the portion of the cash value that is currently borrowed against.

So which type is best?

When you look at the long term growth of a policy that focuses on direct vs non direct recognition there is little difference long term. Many advocates of infinite banking recommend only non direct recognition companies, but we have found that there are some great companies, with fantastic policy design options, from the direct recognition companies.

Conclusion

In the end, the best way to be sure that you are going with the best mutual life insurance company offering the best life insurance policy is to give us a call and let us know what you are looking for and why. Our team of seasoned professionals will be able to match you to the right company and policy that meets your need, tailored to your specific goals and objectives.

So what are you waiting for? Give us a call today and see what we can do for you.

 

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