We originally released our opinion on the best whole life products for cash value accumulation in 2013. We re-visited the subject in 2014, and then never again discussed the topic. In truth, the topic became a bit boring to me. Year in and year out the list didn't change much, and the reason for various companies appearing or not appearing on the list remained the same. I didn't personally find a lot of value in reiterating the same information year after year so the subject died quietly.
The subject resurfaced recently following several events and I decided to look over the original lists from 2013 and 2014. A number of things have changed since we published those blog posts and now I have a lot more to say about this subject and the companies we profiled back then.
A Different Kind of Best Whole Life Insurance List
I don't intend for this post to be the typical list of best companies that offer participating whole life. And there's not a brief explanation supporting the placement of various companies or products on the list.
Instead, I'd like to eat a little humble pie here. That's right, this is more a review of what I wrote about five years ago that offers some insight on where I was right, but more importantly where I was wrong and what facts changed to make me wrong.
We'll work through the list company by company, and address every company that appeared on either iteration of the original two lists from those posts back in 2013 and 2014. I'll also offer up some commentary on why others never showed up on the list and where they stand now.
For convenience sake, here's a quick list of everyone:
American United Life Insurance Company
American United Life issues most of its whole life policies through the name One America originally received high praise for an impressively high performing investment portfolio and a non-direct recognition dividend option.
Sadly, that stellar performing investment portfolio stalled out almost immediately after we published our first review on top cash value products and never regained top rankings among competitors.
The whole life product offerings are good, but not great and lack innovation and flexibility afforded by several competitors.
The company does hold a strong competitive place in the long-term care-esque world of accelerated death benefit features under yet another name…State Life but the focus of this blog post is to evaluate cash value accumulation so no points earned there.
Additionally, the company belongs to the annoying club of companies who make little to no announcements regarding dividend payments to policyholders. We invited them to participate in our annual whole life dividend analysis but received no response.
Ultimately, this wasn't my greatest call. While One America whole life policies have likely performed okay for policyholders, there were better options (emphasis on the plural there).
Guardian Life Insurance Company of America
Guardian Life always held a special place in my heart. At one time I was a career Guardian agent and had an extremely intimate relationship with the company. You'd think this might lend itself to a level of favoritism; you'd think wrong.
In much the same way you know your ex-girlfriend/boyfriend's bad habits and ugly underbelly, I too know way too much about Guardian's warts to be gung-ho for the company.
My praise was always tempered with a healthy dose of hesitation, which at times I felt was appropriately justified–still do at times.
This being said, the company is innovative and I was remiss in not noting this fact. In the years since the original blog post, Guardian has revamped almost all of its whole life portfolio to enhance product features, introduced the only indexing option on a whole life product in the industry (they own a patent, which probably explains why), and made vast improvements to its loan features on whole life products.
Guardian certainly struggles a bit with a declining dividend rate paid to whole life policyholders, but customer service remains very strong and other improvements in product offerings smooth the sharp, stabbing ache of a dividend reduction.
Speaking of which, Guardian has a long-standing practice of smoothing out dividend reductions through its unique approach to special dividend rates paid to current policyholders. It calls this pegging and substitution and it looks like this:
In the second and third policy years, Guardian will pay the policyholder the previous year's dividend rate if the newly declared rate is lower. For example, if the dividend rate for 2017 is 6.10% and in 2018 6%, then policyholders in year two or three receive the old 6.10% dividend rate as part of their dividend calculation.
Pegging calculates a special dividend interest rate based off previous years' dividend interest rates and pays this special rate if it is higher than the currently declared dividend interest rate.
It's important to note that pegging and substitution only apply to base whole life dividends (i.e. not on dividends paid from the use of the paid-up additions rider) so while they are helpful, there are limitations.
We noted in the past that Guardian's 10 Pay Whole Life top performing whole life contract is its product. While this has generally held true, the robustness of Guardian's portfolio warrants some checking with other products from time to time.
Lastly, you should know that Guardian holds a long-standing reputation for a pretty solid risk appetite. It's the only insurer on our list with a table shave underwriting program, which could make whole life insurance an option for someone whose health is less than perfect.
MassMutual has always been the most boring company on our list and those who take comfort in homeostasis will delight to hear that nothing has changed. The company still issues practically the same products with the same features it was issuing five years ago when we began this list.
But the company still manufactures a strong competitor in the cash accumulation world of whole life insurance. Perhaps they could argue no point in fixing what's not broken?
There is one point I want to bring up in an attempt to balance my scorecard of good calls versus bad calls.
I mentioned in 2014 that there was a HUGE gap between MassMutual's dividend interest rate and loan interest rate. Being a non-direct recognition company (mostly) this lead us to caution against some extremely inflated income projections.
As time passed, the MassMutual dividend interest rate came down and came down significantly. Suffice it to say those who didn't heed the warning made some assumptions about future income from the policy that will not illustrate nearly as well with an in-force policy illustration.
Metropolitan Life Company (and Friends)
Okay, we've all done some stupid things. In my defense, MetLife rolled out an arsenal of brand new and shiny whole life products around the time we started the list of top whole life companies for cash value and some of those products generated some impressive numbers.
We even gave Met a thumbs up for entering the winner circle in our analysis on Best Performing 10 Pay Whole Life Policies in 2015. Met also made some talent acquisitions at the time that made us believe they were seriously considering a run back into the whole life business.
We were skeptical, and we noted that at times, but the company remained on the list despite the awkwardness of its place there.
To elaborate a bit, no one else on our list is a publicly owned life insurance company that embraced full demutualization like MetLife did. This sort of business culture appeared counter-indicated to dividend-paying whole life insurance and rest assured every mutual company and pseudo-mutual life insurance company was quick to point this out.
Still, I felt compelled to give Snoopy a chance.
…Then came the SIFI and they booted Snoopy!
MetLife's decision to exit the individual life insurance market in 2016 was a tad shocking to many of us but ultimately gave credence to the criticism lobbed from its mutual competitors.
My decision to keep them on the list for two years goes down as my biggest mistake regarding the Top Whole Life Companies for Cash Value.
Northwestern Mutual only made one appearance on the list. I dropped them in the second year largely because I saw them declining further and further in comparisons for both cash value and income projections.
The nail-in-the-coffin event was when they produced their super secret universal life insurance product as a solution to a potential client because it performed remarkably better on paper than their whole life products.
And the Quiet Company™ remains pretty quiet about its universal life insurance product and also about its declining dividend.
Still, the company's customer service department is hands down one of the best we've ever encountered. And while propping Northwestern Mutual up a bit based on its customer service excellence is sort of like handing out a participation trophy, the one aspect I've come to respect more than any other among insurers is their approach to customer service and policyholder management.
Lots of money building potential doesn't mean anything if you can't see or access your money.
Our relationship with Ohio National has been thorny over the years. They pay attention to us and like to offer criticism to our criticism of them. I actually admire this about them. I admire it because at least they care enough to try and engage in a conversation about life insurance as well as their competitive place in the market.
The company has come a long way since our original list of best whole life companies for cash value. They addressed my original beef and have certainly made efforts to improve upon their products.
The dividend has been in a bit of a free fall. They think I'm too harsh when I say that, but if they don't defend themselves who will?
In the past, we tended to balance out our criticism and praise when it came to Ohio National and we're still mostly at that point with them. With one major exception noted above. We truly appreciate the time taken to engage us.
There's no denying we regard Penn Mutual highly. The company has sound financials and a whole life product that excels at cash value accumulation. Thankfully, this remains true.
Though we do need to note that some changes have come along since we originally discussed the topic of best whole life insurance for cash value. The Penn Mutual whole life product we talked about in the original blog posts went the way of the Dodo. The new product is good, but we liked the old one better.
The dividend rate at Penn remains the same, we wonder how long this will be true.
Penn Mutual did make a substantial increase to paid-up addition fees this year that certainly compromised their good standing in our eyes, but we can't honestly state that the move dropped them in any comparative ranking against the competition.
We feel they made the move largely because they could. And this does support our position that life insurers will always have access to way too many levers when it comes to trying to focus in on factors that declare one ultimately better than another.
This all being said, Penn Mutual was a great call from five years ago. Cash values have performed exactly as projected and the company remains extremely solid. Features are not quite as rich as they once were, but this shines a light on the damaging effect of procrastination.
Does the List Exclude Some of the Best Whole Life Insurance Companies?
There are several companies I never mentioned in the past and my reason was they weren't worth mentioning. That sentiment remains for all of them. No one suddenly came on the scene with a can't live without product or feature. In fact, most have gotten worse through the years.
Keep in mind that this list merely looks at who we find to be the best whole life companies for cash value. Best whole life companies for death benefit is an entirely different story. There are other considerations that you might value more than cash value and that could lead someone down a different path to the best company for their need.
On top of this, I'll warn anyone reading this against assuming that because a company falls on this list, (excluding MetLife for obvious reasons) then proceeding with that company is always a good idea. While these companies do in fact have products that are more or less good options for cash accumulation, the design of the product makes all the difference.
For all of the companies on this list, the ability to deliver return plays a secondary role to the design flexibility afforded by the insurer. Proper policy design will always afford more favorable outcomes when cash accumulation is the key consideration.