Mutual Life Insurance
There are two types of life insurance companies: publicly traded (also known as stock companies) and mutual life insurance companies. Mutual life insurance companies are completely owned by policyholders and are not traded on the stock market.
These life insurance companies are at a disadvantage when they need capital for growth since most of their end of year profits are distributed as dividends to policyholders. This is the reason many mutual companies have decided to change their status to stock companies.
Who Has Ownership Rights In A Mutual Life Insurance Company?
As a rule, only policyholders with permanent life insurance policies have ownership rights in a mutual company. Term life insurance policies are not considered permanent life insurance and do not pay any dividends. Publicly-traded companies have to pay dividends not only to permanent life insurance policyholders, but also to investors who own stock in the company. Since mutual life insurance companies have no investors or shareholders, all of the dividends are paid to the policyholders.
Which Type of Life Insurance Company Is Better?
Both publicly-traded and mutual companies offer the same life insurance benefits. The difference is in the way the dividends are paid and some publicly-traded companies may pay higher dividends than some mutual companies. If whole life insurance is being purchased as an investment, it is best to check the financial performance of the best life insurance companies over recent years to determine which ones are likely to pay the best dividends.
How Does A Whole Life Policy Pay?
All life insurance has a death benefit which is payable to a named beneficiary when the insured person dies. Whole life insurance also has a cash value which increases over time and may be removed from the policy, resulting in a policy cancellation. Policyholders can opt to cash out their dividends each year instead of reinvesting them. Cash value can be used as collateral for a business or personal loan, but the death benefit is reduced by the outstanding balance on the loan.
Does The Company Pay The Death Benefit and The Policy’s Cash Value?
If the insured person dies, the policy pays only the death benefit. The cash value counts as the premium used to cover the company’s cost. If the company refuses to pay the death benefit because the cause of death was not covered, the policy application contained a material misrepresentation, or fraud was used to obtain the policy, they may have to return the cash value to the policyholder’s estate. Life insurance companies do not pay both the death benefit and the cash value.
When Can the Death Benefit Be Denied?
All life insurance policies have exclusions which may include suicide, death while committing a criminal act (felony) and members of the armed forces killed during combat. A lie on the insurance application of such a nature that the company would not have issued the policy if they had known the truth (material misrepresentation) is grounds for denial of coverage. If a beneficiary is criminally responsible for the death of the insured he cannot collect on the policy.
Can Someone Purchase Life Insurance For Another Person?
If an individual has a financial or compelling interest in the life of another person they can purchase a life insurance policy for that person. A wife may buy a policy for a husband, grandparents may buy a policy for a grandchild or a business owner may buy a policy for his partner. As a rule, the person buying the policy cannot be named as beneficiary. A business owner can name the business as beneficiary or a wife may name her children as beneficiaries. Learn more about the different types of life insurance.
Common Life Insurance Policy Exclusions
There is usually a two-year exclusion for suicide, but once the two years have elapsed, suicide becomes a covered cause of death. Individuals engaged in high risk hobbies like rock climbing, car racing and sky diving may find death which occurs as a result of these particular activities is excluded on the policy. Most policies also exclude death resulting from a private plane crash from reimbursements as well.
Life Insurance Quotes Online
Both mutual and publicly-traded life insurance companies offer similar coverage and investment opportunities. The most important part of choosing a life insurance company is to choose one with a good reputation and a stable background.
TheLifeInsuranceQuote.com offers consumers free, instant life insurance quotes online. By comparing life insurance rates, policy coverage, and companies, consumers can make certain they buy the best, affordable life insurance available in the market.
Enter your zip code to begin a life insurance quote now and learn how mutual life insurance can offer you the best coverage for your needs.
