Oh How They Differ
Life Insurance Companies. If this is the first time you are looking to buy life insurance special attention should be paid to the various types of insurance companies..researching carefully their management practices, their net worth and their reputations. The life insurance business is so tightly regulated in the United States that I doubt very much that there is any licensed life insurance company that wont pay death benefit claims when due…
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In recent years, however, more insurance companies are getting into the business of underwriting disability insurance, long term care insurance and other health insurance policies. It may be because of fear of loss or may be because of lack of understanding on the part of some of the principals involved why the provisions of some policies are not clearly described but I am finding that more and more of some of these reputable organizations find themselves on the wrong side of a law suit…
It seems epidemic in proportion especially when it comes to disability insurance. I am very aware that the attorneys specifically advertise…searching for the disgruntled…with the hope that they can find someone who wants to put their hand way down into a deep pocket but if it were not profitable they would quit trying. The only conclusion is that these companies that are constantly targeted should clean up their acts by underwriting policies with clear guidelines as to how a policy really works.
That having been said let us take some time to look at the types of insurance companies that you are likely to encounter in your research. There are basically two types of life insurance companies…Mutual companies and Stock companies.
- Mutual CompaniesMutual Insurance companies are accountable to their policyholders. If you own a policy with a mutual life company you participate in the success or failure of the company. They usually pay higher cash values and dividends than stock companies because they have no stockholders who get a cut of their profits.All their whole life policies are usually participating policies which pay dividends if they perform well as far as investments are concerned and if they keep down expenses.Some Insurance companies use this as a selling point for for their product, however, I don’t know that being a mutual company makes it more profitable…as I am aware of some stock companies that greatly outperform some mutual companies.
- Stock CompaniesStock life insurance companies are accountable to the board of directors of the company and to the stockholders. Their whole life policies are either participating or non-participating. The non participating policies do not pay dividends even if the company performs well. The premiums for non-participating whole life policies are usually lower than those of participating whole life policies.
Both types of insurance companies sell term life insurance policies. As this is pure life insurance the premiums costs are simply determined by calculations made by the actuaries taking into consideration many variables including past and anticipated company profits and expenses.
Each life insurance company is rated by organizations like A.M. Best , Moodies, and Standard and Poors. One of their main responsibilities is to do the necessary research and provide the consumer with sufficient information which helps them make informed decisions about life insurance companies and their practices.
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