Which is better to buy whole life insurance from : demutualised Insurance company or mutual?

Question

New York Life is not demutualised, but Metlife is. some say it better to buy wholelife insurance from non-demutualised insurance company. Is that true? thanks

Answer 1

Term insurance is SOMETIMES good. But, like in clothing and shoes, NO ONE PRODUCT IS ALWAYS BEST! It ALWAYS depends upon the reason you are buying the insurance as to which one will serve your needs better.

I think if one holds themself out to be a financial professional, they should take care to double check their assertions before they publish them - else, they may have a sizeable claim on their E&O insurance; and, at least in my state, they may be pushing used cars after the state insurance department gets done.

Mr. "Only Those Who Agree With Me Tell Truth" didn't do his math very well. And, to ensure that if he edits, his original post will still exist, I'm copying part of it here:

He says:
"Hey, check out the cost between whole life and term over the long run:

Lets take a HYPOTHETICAL example of the difference between whole life insurance and term insurance in numbers. Lets say this person is 30 years old and is rated non-preferred.

Whole life:
Coverage: $100,000
Premiums: $1000/yr until age 98
Cash value: First 2 years, $0. By age 60, $40,000.

30 year Term:
Coverage: $100,000
Premiums: $250/year for 30 years
Cash value: N/A
Investing the difference...
Invest $750/month @ 0%: By age 60, have $270,000
At 5%: By age 60, you will have: $626,795
At 12%: You will have $2,647,435 in 30 years.

Taking a look at the difference, would makes more sense to you? Whole life or term insurance?"

Firstly, he uses and example of a Whole Life policy that costs $1,000 PER YEAR, and then slyly and dishonestly compares it with a term policy with premiums of $250 a year and compares "investing the difference" of $750 PER MONTH!

By my calculations, $750 per month is $9,000 per year, so it's no wonder the invested portion out plays the WL where the ENTIRE premium is only 1/9 of that for the ENTIRE YEAR!

The real math would be that if you save the remaining $750 per year for 30 years, you'd have $22,500 at 0%.

Even at 4% (which most professional financial planners recommend as an estimate), over 30 years, your $750 per year would only grow to a little over $43,000. If your WL policy has a cash value of $40,000 (which you can access at any time), then the insurance protection in a WL has actually cost you about HALF the cost of the term insurance .... PLUS, the term insurance will EXPIRE at that point, and even Mr. "Truth" admits you MAY be able to keep it for about $1,500 per year (versus the $1,000 you'd still be paying for the WL). Actually, you MAY NOT be able to keep it, as some companies will not allow you to renew a term policy at that age; or, may require you to undergo underwriting again (and if you have developed a health problem in those 30 years, you may pay much more if you can even get it).

Additionally, if you invest the other $750 per year, you likely will not net the full return, as many financial products, including many mutual funds, incur income tax each year, EVEN IF YOU DO NOT ACCESS THE MONEY. With the cash value of a WL policy, there is no income tax on money left in the policy; and, even if you withdraw funds, only the amount in excess of your basis (your premiums paid) is taxable. And, under current tax laws, in most situations, you will not be deemed to have withdrawn any excess until you have withdrawn an amount equal to ALL premiums paid.

There is much more that Mr. "Truth" slides by without full disclosure. I am not opposed to term insurance; and would estimate that of my insurance sales, about 60% - 75% are term (counting policies where I mix permanent - WL - and term). However, after nearly 35 years as a financial planner and analyst, I have learned to be skeptical of those who slide the facts under the rug and present their opinions as the only ones that count.

As for credentials, I have a few also. Aside from the years of experience with professionals of all sorts, I have the credentials as well. I just don't flash them around, because the credentials don't mean anything. It's facts that count.

Answer 2

Whole life pays dividends, which are not taxable to you. After about 15 years or so the dividends will pay the premiums, however, Variable life or indexed Universal life might be a better way to go. Long term gain can be about 8 1/2 % with lots of tax benefits. Depends on the funding amount.

As buying from a stock company or a mutual company, I'd pick a stock company because they usually offer better plans of insurance. New York Life is a very good company and you pay for the name.

If you are in California give me a call. Well, you can call even if you are not living in California. I am only licensed in California but we can talk. WWW.INSURANCEBYBARCLAY.COM

Answer 3

The rhetoric is that because mutual companies are not stock companies, they are owned by policy owners, so they are more loyal to their clientele. Even though mutual companies don't answer to shareholders, their goal is still to be profitable.

A decade ago, most well-known companies were mutuals; but most of those have now demutualized, and many have since been acquired by others. For example, John Hancock demutualized in 2000. One of the best known names in the US insurance industry, JH is now part of Munulife, a Canadian company. It's probably safe to say that this is good for the customer, as only a financially stronger company would be capable of such an acquisition.

It's probably better to pay attention to the company's financial ratings (AM Best, Standard & Poors, etc.). They can easily be found on the internet.

A good option is also to buy from a mutual company that is in the process of demutualizing. Based on the face value, age, and cash value (if applicable) of the policy, you will be issued stock in the company upon IPO. When MetLife demutualized, I was issued 165 shares which I eventually cashed in for about $4,500.

Answer 4

Buy Term Life Insurance. It's financially smart. Don't make mistakes in life. Google: Why is Whole Life Insurance one of the worst things you can do in life.

Answer 5

This may be off-topic, but I would recommend that you buy TERM life insurance instead of whole life. Every financial adviser I have consulted over the years recommends term life instead of whole life because it is much cheaper. Whole life advertises itself as an investment, but you can typically buy an equivalent term life policy and invest the different in price. In the long run, you will come out much better.

Answer 6

What does demutualised mean?

Hey, check out the cost between whole life and term over the long run:

Lets take a HYPOTHETICAL example of the difference between whole life insurance and term insurance in numbers. Lets say this person is 30 years old and is rated non-preferred.

Whole life:
Coverage: $100,000
Premiums: $1000/yr until age 98
Cash value: First 2 years, $0. By age 60, $40,000.

30 year Term:
Coverage: $100,000
Premiums: $250/year for 30 years
Cash value: N/A

Investing the difference...
Invest $750/year or $62.50/month @ 0%: By age 60, have $23,250.00
At 5%: By age 60, you will have: $55,675
At 12%: You will have $249,400 in 30 years.

Taking a look at the difference, would makes more sense to you? Whole life or term insurance?

Ok, what if you only invest $100/month? Would you still buy cash value life insurance?
@ 0%: You will have $36,000 in 30 years.
@ 5%: You will have $83,573 in 30 years.
@12%: You will have $352,991 in 30 years.

How much would it cost if I renew my term in 30 years, keeping coverage the same?
At age 60, most insurance companies can only offer term up to 20 years.
So, for 20 year term for $100,000 coverage: $1500/year.
Yes, this would seem more expensive than to buy whole life 30 years ago, but you need to look a the cost.

Comparing term and whole life:
With term insurance, you are paying a total of $7500 in premiums from age 30 to age 60.
With whole life, you are paying a total of $30,000 from age 30 to age 60.
Then you renew it to a 20 year term, you are paying $30,000 from age 60 to age 80.
With whole life, you are paying an ADDITIONAL $20,000 from age 60 to age 80.

So total cost from age 30 to age 80:
Term insurance: $7500 + $30,000 = $37,500.
Whole life: $30,000 + $20,000 = $50,000.

At age 80, do you think really need life insurance still? What finanical obligations do you have at age 80? I doubt you will have any kids to take care of. I almost certain that your mortgage is paid off. As for credit cards, you should be able to pay the balance off each month if you started investing at age 30. Do you see why term insurance makes more sense than whole life or any other kinds of cash value?


If people saw the numbers, they would know that buying term and investing the difference is the way to go.