Shopping for life insurance can feel overwhelming at times. Not only do you want to find a life insurance company with high ratings, but you also want to make sure you find one that meets your needs because not all A-rated companies are right for everybody. Each life insurance company offers different products and has a different underwriting process. Those are only a few of the many differences. Did you know that life insurance companies are also categorized into two types? There are mutual life insurance companies and stock companies.
Which Type of Life Insurance Company Is Right for You?
Policyholders own mutual insurance companies. Contrarily, stockholders own stock companies. Neither type of insurance company is necessarily better than the other. There is only one significant difference worth mentioning. If you are interested in a particular life insurance product with cash value, then a mutual company may be the better choice. The primary reason someone would choose a mutual company for cash-value products involves the annual dividends returned to the policyholders.
How to Choose the Right Life Insurance Company
When deciding between a mutual or stock insurance company, remember several key factors during the application process. First, you want to meet with an independent broker, not a captive agent. A broker can present a variety of life insurance companies and products and accurately help you find a policy that is right for you. Then, you need to go through a needs analysis with them. This process will help you determine which type of company to choose and which product. Also, do not be afraid to ask the agent some questions:
- Why should I have life insurance?
- How much insurance should I have based on my needs?
- What type of insurance – term, permanent, universal – is right for me?
- What different products are available?
These questions should serve three purposes:
- determine if you qualify for the life insurance for which you are applying
- resolve what price you will end up paying for your life insurance
- decide which life insurance company will be the right one for you!
Mutual vs. Stock Insurance Companies: An In-Depth Comparison
As previously discussed, mutual insurance companies are owned by their policyholders, while stock insurance companies are owned by external shareholders. This fundamental difference influences each company’s operations, profit distribution, and policy offerings.
Mutual insurers typically focus on long-term stability and policyholder benefits. Often, profits are redistributed to policyholders through dividends or reduced premiums. This structure can lead to a stronger alignment between the company’s interests and those of its policyholders. However, mutual companies may have limited access to capital since they cannot issue stock, potentially affecting their ability to expand or invest in new technologies.
Conversely, stock insurers have the flexibility to raise capital by issuing shares, enabling rapid growth and diversification. However, this structure might prioritize shareholder returns over policyholder benefits, potentially leading to conflicts of interest.
Additional Questions to Ask When Purchasing Life Insurance
Beyond understanding the company’s structure, it’s essential to dive deeper into specifics that affect your coverage and financial planning:
- What riders are available? Riders are additional benefits that can be attached to your policy, such as accelerated death benefits, waiver of premium, or accidental death coverage. Understanding available riders helps tailor the policy to your unique needs.
- Are premiums guaranteed or subject to change? Some policies have fixed premiums, while others might increase over time. Clarifying this ensures you can maintain the policy long-term.
- What is the claims process like? A straightforward and efficient claims process is crucial for your beneficiaries during challenging times. Inquire about the average time for claim settlements and any required documentation.
- How does the policy’s cash value component work? For permanent life insurance policies, understanding how the cash value accumulates, the interest rate applied, and options for accessing these funds is vital.
- Are there any policy loans available? Some policies allow you to borrow against the cash value. Understanding the terms, interest rates, and potential impact on the death benefit is essential.
The Role of Independent Brokers in the Selection Process
Engaging with an independent broker, like those at Empower Brokerage, can significantly enhance your life insurance purchasing experience. Unlike captive agents who represent a single insurer, independent brokers have access to multiple insurance companies and products. This breadth allows them to provide unbiased advice tailored to your specific needs and financial situation. They can assist in conducting a comprehensive needs analysis, comparing policy features, premiums, and the financial strength of various insurers. This comprehensive approach ensures you select a policy that offers optimal value and aligns with your long-term objectives.
Choosing between a mutual and stock life insurance company requires careful consideration of each insurer’s structure, financial stability, product offerings, and alignment with your personal goals. By asking pertinent questions and consulting with knowledgeable professionals, you can secure a life insurance policy that provides peace of mind and financial security for you and your loved ones.
Life Insurance Questions?
We hope that this information on life insurance companies is useful to you.
If you’d like to learn how we can help you plan your retirement, call Empower Brokerage at (888) 539-1633 to speak to one of our Life and Annuity experts or leave a comment down below.
Get affordable life insurance quotes by clicking here.
See our other websites:
This article was updated on 3/6/25.