When considering the best whole life insurance for retirement savings or any other derivative dealing with cash balance focus (e.g. Bank on Yourself®/Infinite Banking®, collateral assignments, retirement income, etc.) it’s vital to pick a product and a carrier that can best accommodate this goal.
Whole life insurance can be an excellent choice for accumulating cash on a tax deferred and even tax free upon distribution strategy, but one small detail most insurance agents/brokers tend to forget to mention is the fact that not all whole life insurance contracts are created equally.
And since we spend a great deal more time than the average agent/broker planning, designing, and implementing policies for this very purpose, we’ve taken to rolling out a winners list each year based on our experience and knowledge of the industry’s offerings.
Alphabetical just like Last Time
Though I’ve been asked numerous time here and elsewhere, I’ll continue to “dodge the who is the best” question like Hillary Clinton dodges questions about her presidential aspiration, though for completely different reasons. While the former Secretary of State (among many other things) does this mostly to be coy ,I can’t declare a clear winner because circumstances are not universal.
And while there are some financial “gurus” who think personal finance can be pretty close to one-size-fits-all I know from firsthand experience this is far from the case.
One quick side note, we’ve decided for reasons involving uniformity and scope that it made sense the cut the list down to a maximum of five. This means two spots have been chopped compared to last year’s list.
Without further ado, let’s get to the 2014 list.
Though the Guardian has had a bit of rough go of things most recently, we remain convinced that they are dedicated to providing superlative benefit to their current and future policy holders. The dividend took a nasty tumble last year and we are awaiting the announcement for this years rate (sans much anticipation for amazingly good news).
Of course, it’s incredibly short sighted to ignore some of the really cool tangential benefits Guardian placed in its whole life contracts from which policyholders prior to last year are benefiting as we speak. The company that has one of the most complicated approaches to declaring dividends based on an array of circumstances that affect the actual dividend paid has created a system that is actually working to its policyholders benefit.
What Guardian calls pegging and substitution is ensuring that many-a-policyholder isn’t as upset about last years news as would have been the case at other insurance companies (hooray!). And let’s not forget that obnoxiously complicated flow chart that determines what your dividend rate is after about 25 years of being a policyholder in the event you decide to take a policy loan.
At the end of the day, underwriting is strong and there is a multitude of features boasted by this company’s products that can’t be ignored in certain circumstances.
Despite having some of the most outdated (in terms of modern wiz bang features) whole life insurance products on the list of companies, MassMutual has long mastered one key feature to entrance on this list—accumulating cash value.
While the approach to paid-up additions is more than just slightly annoying (pick one and be done with it already) there’s no denying MassMutual’s dominance in the whole life insurance market especially as it relates to cash accumulation focused strategies.
But this one is certainly one of the weaker underwriters, so if you’re not someone whose doctor visits result high praise and encouragement to keep doing what you’re doing, MassMutual may not be the best fit.
Like most insurer’s they do have certain niches where they have strengths, but this can be a tad tricky to place a finger on at times.
Of course, if you’re healthy have at it.
One strong cautionary tale about expectations for the Blue Chip Company, the dividend rate is high and the loan interest rate low. This makes for some impressive distribution assumptions, but also seriously reduces the probability of those projections playing out. We’d recommend an adjustment to loan rates to keep expectations closer in line with reality.
MetLife is a consortium so to speak. Depending on where you live, the contract you receive will be issued by either MetLife itself or MetLife Investors. The significance of this is relatively non-existent, but for those who wonder why the policy says one thing or the other, this is the answer.
MetLife is working to bring back a competitive position for whole life insurance and it’s been doing an excellent job in a few niche areas (key word niche areas). While this company certainly won’t always be a top choice in all situations, it certainly hits a home run in a few areas especially relating to distributions and older insured’s.
In addition, based on Met’s membership in the current collection of four companies looking to make indexed universal life insurance proposals almost as complicated to follow as a whole life insurance proposals suggests that they aren’t interested in changing course anytime soon to focus their efforts on universal life insurance instead of whole life insurance.
Further comforting is the fact that profitability at MetLife is strong and far exceeds total dividend payouts in recent years. This gives us some indication of Met’s ability to maintain their current dividend rate for sometime.
Some people think we hate Ohio National, not true. We’ve just beaten them up when they or the agents who represent them say and/or do stupid things. They are still a strong contender in this space and while the flexibility of their products leaves a lot to be desired they still have reasons for a serious look.
They have an approach to getting things done and customer service that is far better than a lot of companies, and conservative nature coupled with a undeniable fact that they clearly understand the type of company they want to be an the type of business they want to be in brings a lot of peace of mind—it certainly reduces fears about the possibility that they could bet the farm on something foolish
Another company not well known for liberal underwriting so like MassMutual if you have a riddled health history, you’ll likely find better offers elsewhere.
Penn Mutual received high praise from us in the past in this space and this praise will continue. They changed whole life insurance products recently and this raised some doubt initially about where they’d fall in the future, but our initial fears were proven unfounded.
Following up on their traditional approach they’ve opted to use just one product that is highly customizable instead of making us pick and choose what features we want most among an arsenal of whole life products like all of the other carriers do.
But there is one very strong annoyance and complaint we must voice.
Their approach to underwriting the death benefit created by paid-up additions has gotten a tad ridiculous. It seems more recently that we can barely design a policy with an underwriting death benefit amount much below $8 million after we design it to optimize cash. While this isn’t often a problem with respect to proving the financial eligibility, it’s burdensome insofar is it requires a lot more underwriting requirements.
Now to be clear, it’s not unusual for a life insurer to underwrite paid-up additions. They do, after all create a death benefit that is a multiple of the incoming money, but Penn Mutual is starting to take this to a level that removes them from consideration due to the inflated underwriting amount.
Besides this annoyance, they still have one of the best products for cash accumulation that allows exemplary flexibility and design. They also happen to pay out a total amount in dividends that falls way below total operating cash meaning we’re quite comfortable with their ability to maintain a competitive position within the market for quite sometime.
This is due to their greater diversity in life insurance contracts issued, quite unusual for a mutual but favorable nonetheless. We also very much like the over-loan rider that allows us to dial income into a specific time period, giving Penn Mutual a strong advantage over it’s competitors when it comes to distributions.
Not all Whole Life Contracts are really intended for Cash
I wanted to take a second to note that some of the companies listed above have products that are designed for cash and some for death benefit. Just because a carrier is on the list, one should not automatically assume that any of their products would do if planning to purchase whole life insurance for cash accumulation.
Also, for those looking for an even deeper look into carriers and their strengths, keep an eye out for upcoming work to be released late this year.