Top 7 Whole Life Insurance Companies For Cash Value
Let’s not waste any time, here are our ratings for the best whole life insurance companies for cash value: Top 10 life insurance companies.
All of the companies we picked are Dividend paying participating policies. We will go over why we picked participating policies. But first we need to go over some of the basics.
Also in our article, we will go over:
What Is Whole Life Cash Value?
How Can I Access Cash Value?
More Companies With Whole Life That Didn’t Make It
Let’s look at some of the basics first so we understand what are the building blocks of a good whole life insurance policy.
What Is Whole Life Cash Value?
Whole Life Insurance is a permanent insurance with strong guarantees. It has a guaranteed death benefit, guaranteed premiums, and guaranteed cash value growth.
Cash Value builds inside of whole life insurance policies. Imagine this cash value portion like a savings account, that you can access at any time. We say it is a savings account, because the cash value will only go up. It never fluctuates up and down.
Cash value is what makes every whole life insurance a really attractive asset for many people.
What Builds Cash Value?
There are 2 aspects on most whole life insurance that build cash, the guaranteed rate and non guaranteed rate. The guaranteed rate of return is fixed rate of return that the each company guarantees. The non guaranteed rated includes dividends from participating insurance companies. This dividend get’s added to the guaranteed rate.
Also the cash value inside of a policy grows taxed deferred.
MassMutual guaranteed rate is: 4% and their dividend is 2.7%.
This gives us a total dividend of 6.7%.
Get More Cash Value
In addition there are ways of getting more cash value out of every whole life insurance. This concept has been illustrated in depth in books like Infinite Banking and Bank on Yourself.
You can get extra cash value by getting more paid up additions on your policy ( see paid up additions rider ). All of the companies we listed have this feature.
10 Pay Products
Whole life insurance can be paid up. This means that you will not have to make more premiums, but you keep the insurance forever. Some of the best products out there for cash value accumulation are 10 pay, which means you pay for 10 years and you are done.
How Can I Access Cash Value?
The cash value in a whole life can be accessed in many ways.
The most common way of taking money out of a whole life is through loans. These loans do not have to be paid back. Because whole life has a permanent death benefit, if you die your loan will be subtracted from you death benefit.
The reason that taking money out in loans is the preferred method is because when you take a loan out of a policy, you do not have to pay taxes on that loan.
How We Compare Cash Values?
In order to find which company is the best, we nee to compare cash values property. We have run hundreds of illustrations to find out which company was the best.
However, we cannot only compare the total cash value in a policy. In reality you always need to illustrate income coming out of a policy, taking money out of the policy is one of the most important aspects. This way you truly see how a policy performs.
Non Direct vs. Direct Recognition
There are two type of whole life insurance contracts:
Home life insurance
This is a very important concept that you need to understand, when you pick a whole life insurance. This determines how loans in a contract when you take money out of a whole life affect a policy.
Non-Direct recognition will pay the same dividend even if you take money out of a policy as loans. This is why Non Direct recognition will illustrate more cash (income) coming out of a policy.
So you shouldn’t compare cash values alone, because even if a direct recognition company has more cash value, you will be able to take out less cash.
Here is a list of direct recognition and non direct recognition companies.
Non Direct vs Direct Example
Let’s use MassMutual who (as far as we know) is the only company that can do both direct an non direct recognition contracts. This will help us understand how the cash value can change drastically when you pull money out of a policy.
The following picture is a sample illustration. We used the following variables in the illustration:
Ultra Preferred (Best Rating Possible)
Paid Up At Age 65 (No More Premiums)
In addition we illustrate taking maximum income from the whole life starting at age 65.
If you look at the previous image, in the last rows you will see the numbers of a whole life after 45 years.
What you need to notice is that there is more than a $95,000 difference between taking money out of a non-direct recognition vs direct recognition. Non direct recognition is what generated more money in the log run, even-though the cash values where the same before taking income out.
Always Chose A Mutual
In reality the most valuable whole life insurances are sold by Mutual companies. In reality, mutual companies will outperform the competition because the policy holders are part owners of the company. So mutual companies pay dividends directly to policy holders.
As opposed to stock companies where dividends and profits go to stock holders first, and then the rest will go into the policies. So we always advice to chose mutual companies vs. stock companies.
From our top 7 list, all companies are mutual companies.
Top 7 Whole Life Insurance Companies For Cash Value
We want to help you pick the best whole life insurance for cash value growth and accumulation. So we created this list to help you narrow down the field to a few of the best.
The battle for the top spot was very hard to pick, but someone had to win.
Our ratings are based on performance, but also based on what company our clients pick as the best choice more often.
In our top 7 ratings we compared all of the following variables:
Historical Dividend Rate
So here are our in depth reviews for whole life insurance for cash value accumulation:
#1 Mass Mutual
MassMutual takes our #1 spot. MassMutual is a Fortune 100 Company with very high quality ratings and a long history of performance. They have been around for more than 160 years. Also, they have the highest participating dividend in the industry and the highest average whole life dividend over the past 15 and 25 years.
MassMutual is growing very rapidly, which can only help their performance. They are committed to a small product base, and in particular to their best selling whole life insurance.
They have a non-direct recognition and direct recognition, so they are the only company as far as we can tell that has both options available. For more information, you can read our MassMutual Whole Life Review.
A.M. Best Company: A++ (Superior; top category of 15)
Fitch Ratings: AA+ (Very Strong; second category of 21)
Moody’s Investors Service: Aa2 (Excellent; third category of 21)
Standard & Poor’s: AA+ (Very Strong, second category of 21)
The dividend history since 2000 is very impressive:
For more information on MassMutual dividend go here.
Best Products For Cash Value
This product you only pay for 10 years. After 10 years the policy is paid up, which means you keep the policy and the cash value grows and death benefit grow.
This product has the least amount of death benefit, and it is very cash rich.
Just like Legacy 10, it is a cash rich product. However premiums last for 20 years. This can be a great product if you are looking to get a whole life insurance for kids.
HECV (High Early Cash Value)
This is a product that is designed to have significant cash value early in the policy. This may play a significant role if you are using whole life for business planning.
In addition it reduces the agent commission significantly, so most agents will not want to show you this policy. Read more on High Early Cash Value.
Our #1 Pick
MassMutual has a non direct recognition whole life. An industry leading dividend paying 6.7%. In addition, the average dividend for the past 15 years is the highest in the industry at 7.24%. You can’t go wrong with a MassMutual whole life policy.
#3 Penn Mutual
Penn Mutual could have been our number 1 pick very easily. But we had to have a winner. Penn Mutual has one of the highest dividend in the industry, and also the most stable dividend over the last 10 years.
The only reason we couldn’t give them #1 was because their whole life is a direct recognition. Also you will need to get the base product customized, or you will get a base, sub-par whole life. Check out our Penn Mutual Whole Life Review.
Moody’s Investors Service Aa3 (Excellent)
Standard & Poor’s A+ (Strong)
2015 revenue of $2.3 billion
2015 net income of $209 million
#4 New York Life
New York Life is a fantastic company with great whole life products. Current dividend is 6.25% which is very impressive. New York Life is a captive company, so only their agents can sell this product on premiums under $25,000.
The performance on their whole life is fantastic, and they are position to be one of the leaders in the industry for some time. For more information, you can read our New York Life Whole Life Review.
In 2016, New York Life will pay approximately $1.7 billion in dividends to policyholders. This is the largest payout in company history.
Life insurance sales
New York Life has experienced a 37 percent increase in dividend payout since 2012.
New York Life has $923 billion of individual life insurance in force.
#5 Guardian Life
Guardian Life Insurance Company of America has a lot going for it, including a long history, strong dividend payments, and a variety of whole life insurance products. The current dividend and cash value performance is a lower than some of the top whole life’s in the industry, so this makes their whole life underperform. For more information, you can read our Guardian Whole Life Review.
Whole Life Companies That Didn’t Make The List
It is important for us to list other companies that whole life as well. Because we get questions about comparing companies very often.
So we give you a quick analysis on other whole life companies for cash value that didn’t make our top 7 list.
Northwestern Mutual used to be the leader for many years in whole life insurance. However, their recent downturn in their dividend rate makes them not competitive anymore. Their current dividend is 5.0%. Also their policy is direct recognition, and it will not illustrate as much income coming out.
Foresters is a fraternal insurer that is growing in popularity. They have a fantastic list of products and benefits in their policies. However for cash value accumulation, their whole life insurance is not a good choice. Their whole life is expensive compared to the competition and the cash value growth is sub-par. However, the living benefits that come with their whole life are second to none.
Liberty Mutual may be a one of the largest insurance companies in the U.S., but for whole life insurance for cash value, they do not perform very well. Their whole life is a very old school product that is made for permanent death benefit at a lower price. So cash value growth look elsewhere.
State Farms still writes significant whole life insurance business. We believe that it’s mainly due to convenience, because their whole life, even-though not terrible, is not competitive with the best whole life companies out there.
Minnesota Life was founded in 1880. You may see a mention of Securian on their policies. However, Minnesota Life still operates under its own name, but under the larger Securian banner.
In reality, if you want to consider a policy from Minnesota Life, you should stay away from the whole life, and look into their Indexed Universal Life. Their whole life is more expensive and it underperforms our top 7 list.
Illinois Mutual goes after the middle/lower income market, and they do have an interesting product base. Their whole life is very affordable, but it is not designed for cash value purposes.
Finally, you can see we put a lot of thought into our ratings, and we will be happy to change these as dividends, performance or company strength changes.
However, we want to stress that in order to get the best whole life insurance company for you, you should speak to an expert that will customize it for your own needs. You may value more company strength than current dividend rate, or cash value growth more than death benefit growth.
So always remember to customize your whole life for your needs.
If you would like to get a quote you can run one instantly in our main page, or you visit here.
Stay tuned for our next article “Top 7 Whole Life Insurance Policies For Death Benefit”