Posted by (American Life InsuranceGuidance Network) in the "LIMRA 2018 Market Report:What insurance do Americans buy?"In the article, the savings dividend life insurance that appeared in the 50s (whole life) Category, still occupying 36% of the US personal life insurance market.In the next series of articles, we will start the year-end insurance company inventory in 2018 and selectMost cash valueOf 5 companies provide savings and dividend-type life insurance (whole life) Products of American Life Insurance Company.
Our selection focuses on "Cash value growth"On this goal. Therefore, before starting the selection, we first explain the "cash value" and state our basic criteria for choosing a life insurance company.
What is the "cash value" of savings dividend life insurance?
Savings dividend-type life insurance (Whole Life) is a category of whole life insurance products.The insurance company guarantees to policyholders a guaranteed death benefit, a guaranteed fixed premium, and a guaranteed increase in "cash value".
The "cash value" comes into effect with a savings-participating life insurance policy.Imagine this "cash value" part, like a savings account, opened by you with an insurance company.You can check this account at any time.We call this a "savings account" because the cash value in it will only increase.It never fluctuates up and down.
It is precisely because of the existence of "cash value" that life insurance policies with this function have become attractive assets for us.
How does savings-participating life insurance realize the growth of "cash value"?
Most savings-participating life insurance plans increase the "cash value" part through two aspects. These two parts are:Guaranteed rate of return and non-guaranteed rate of return.
Guaranteed rate of returnIt is the insurance company that guarantees a fixed rate of return to the policyholder. Non-guaranteed rate of returnIncluding dividends from insurance companies participating in the policy.This non-guaranteed dividend rate, plus the guaranteed rate of return, is the overall return of the policy.
*Dividend Interest Rate (DIR)NotThe rate of return on the policy, the rate of return on the policy, or the rate of return on the cash value of the policy.It is determined by the insurance company unilaterally according to the year according to the financial situation of the financial insurance company.The dividend yield can be changed, and there is no guarantee whether there will be a dividend or how much the dividend will be.
for example:
A life insurance company, a savings dividend-type policy product, gives a guaranteed rate of return: 4%, and the dividend interest rate for the year is 1.8%.That year, the person's overall income for that year was: a 4% income guaranteed by the cash value part, and a 1.8% dividend given by the insurance company.
Other ways to rapidly increase cash value
You can get faster "cash value" growth by paying off your insurance policy as soon as possible.The insurance companies we selected next will all accept payment in advance.
10-Pay Plan Policy
The most traditional whole life insurance premium payment scheme is to pay for as long as you live.This approach is not conducive to the growth of cash value at all.But today's savings and dividend life insurance can be paid in advance.Under the framework of relevant U.S. laws, the most suitable policy payment plan for the accumulation and growth of "cash value" is called10-Pay". This means that you only need to pay 10 years of premiums to get life-long protection.
How to withdraw the "cash value" in a savings-participating life insurance policy?
The cash value in a Whole Life insurance policy is usually withdrawn in the following three ways:
- Loan from insurance policy (Loan)
- Distribution
- Dividend (Dividend)
The most common way to take money from this type of insurance policy is through a "loan from the policy."There is no mandatory repayment of these loans.Because the savings dividend life insurance provides a death benefit, if you unfortunately die, the outstanding loan amount will be deducted from the death benefit.
Another advantage of taking money through a "loan to insurance policy" method is that when you take a loan from the insurance policy, you do not have to pay taxes on the loan.
Does the insurance company provide a better cash value growth strategy?
In order to select the insurance company that provides the fastest track for cash value growth, we cannot simply compare the growth of continuous and fixed premiums.
In real life, at different stages of our lives, we often need to take money out of insurance policies to deal with and survive different situations.At this time, we have to fully evaluate what kind of cash value growth strategy this type of policy has when taking money out of the policy.Here, we want to specifically explain the following very important concept.
Non Direct Vs. Direct Recognition
All savings and dividend-type life insurance (Whole Life) policy contracts can be divided into two categories:
- Direct Recognition
- Not directly counted (Non Direct Recognition)
This is an important indicator of judgment when evaluating and choosing savings-type universal insurance policy products.This determines the impact of this loan method on the cash value of the insurance policy when the money is taken out of the insurance policy in accordance with the loan method agreed in the contract.
The borrowing method in the “not directly credited” savings universal insurance policy is the same asIndex Universal InsuranceInsuredVariable LoanThe borrowing method is very similar-When you take money from the policy, the money is not included in the cash value for deduction, and the cash value of the policy is still not withdrawn for dividends.Therefore, "not directly credited" savings-type universal insurance policy products can provide better cash value growth.
When we evaluate multiple insurance companies, we are not simply linking the growth of cash value to the single factor of whose dividends are the most.A "direct credit" life insurance company, even if it provides policyholders with higher cash value dividends or dividends, in reality you may get less money.Therefore, we must fully consider this factor.
Is this insurance company a mutual insurance company?
If you don't know what insurance company to choose, always choose a mutual insurance company.
In the real world, the most valuable savings and dividend life insurance products are all underwritten by mutual insurance companies.
Mutual insurance companies pay dividends directly to policyholders. This type of policy is called a "participating policy (Participating policy).
The difference between listed company-type insurance companies and reciprocal insurance companies is that the income and dividends of listed companies must first be given to stock holders, and the rest may be given to policy holders.This is determined by the nature of the company. The following are the differences between the two types of companies defined by California Insurance Law:
- Listed companies are owned by public investors, investors provide funds, enjoy profits and bear losses; the goal of listed companies is to obtain benefits for investors.
- Reciprocal insurance companies are jointly owned by all policyholders and enjoy profits or bear losses; the goal of reciprocal insurance companies is to provide insurance products to company owners, namely policyholders, at the lowest cost.
Therefore, for listed companies, in order to appease Wall Street and short-term investors, they often make financial decisions for quarterly earnings reports.Mutual companies do not have these potential conflicts of interest and tend to make long-term stable decisions.
According to the insurance laws of the United States, some states clearly stipulate that mutual insurance companies must pay more than 10% of their reserves to their customers in the form of dividends.The case of Penn Mutual's settlement with the policyholder at a sky-high price of $1,100,000,000 in the first half of last year was a case of protecting the policyholder of a mutual company.
Therefore, American Life Insurance Guide always recommends reciprocal insurance companies.The five insurance companies we selected, without exception, are all reciprocal insurance companies.
Summary
OnNext articleAccording to the insurance company’s own credit rating, historical dividend yield data, current dividend yield data, cash value performance and other standard considerations, we will publish the "Savings and dividend policies performed best in 2018"The 5 American life insurance companies.
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