In today's video
we will cover the 4 major mutual companies
and their 2023 dividend interest rates
that will be applied
to whole life insurance policies
so we'll cover the updated dividend rates
and then a whole lot more
so let's get on into it and have some fun.
Beginning with our 4 major mutual companies
we have MassMutual
Guardian
New York Life
and Northwestern Mutual
in no particular order
so kicking off
with the 2023 dividend interest rates
here's what we have Mass Mutual at 6%
Guardian at 5.75%
New York Life at 5.8%
and then Northwestern Mutual at 5% flat.
Now to the right
of the 2023 dividend interest rates
we see what the dividend interest rates were
in 2022
so what you'll see is that all
with the exception of one
of the major mutual companies
maintained the exact same dividend rate
that we saw in 2022 no change
Guardian on the other hand
did have a slight end increase we see 0.1%
so their total dividend interest rate is 5.75%.
Now dividend interest rates are very important
when we look at whole life insurance policies
however anytime we see
a dividend interest rate
on a whole life insurance policy
is that what our policy is actually growing by?
For example
if you have a policy with MassMutual
let's say you've got $100,000 in cash value
and you see a 6% dividend interest rate
does that mean you would receive
$6,000 in earnings
because 6% of $100,000 is $6,000?
The answer is no and the reason why
is because anytime we see
a dividend interest rate
we always want to remember
that that is a gross rate
that is applied to your policy
after the insurance company
assesses their insurance expenses
mortality charges
and everything that comes
with the actual life insurance policy
what we want to look for
is the net internal rate of return
what is the cash value actually growing by.
So our company
what we specialize in
is whole life insurance products
specifically designed for maximum cash value
that's what we do
maximize the upfront cash value
maximize the long-term cash value
and then work with our clients
throughout the life of the policy
meaning as long as they have that policy
and really helping them use the policy
what does it look like
when we want to take out loans
and pay them back
or don't pay them back
and everything that comes with the product
that we've got a lot of content on
however
we have stated many times over the years
that we recommend
the 4 major mutual companies
which are Mass, Guardian
New York Life and Northwestern Mutual.
The reason why
well there's a number of reasons
I'm going to go through
3 of the main reasons next
so why do we recommend the big 4?
(1) this is the biggest one in my opinion
and we're going to provide
more information on this shortly
proof of performance
cash value
internal rates of return
the internal rate of return
is your net growth rate on cash value
specifically on whole life insurance products
this is the number one reason
and again proof of performance
is what I am so big on
not just what do the numbers show
on an illustration.
(2) where the money goes
so another way to put this
is follow the money
copy what the wealthy are doing
when I look at banks
positioning boatloads of money
into cash-value life insurance products
and then analyzing
the companies that they're selecting
often will see the 4 major mutual companies
selected first
typically you'll see MassMutual
and New York Life
they've been 1 and 2 for a long period of time
Northwestern Mutual
has a very attractive BOLI product
however Northwestern Mutual
is a company that only works
with career agents
meaning as an independent broker
we cannot offer their products
however they have a fantastic BOLI product
and then when you look at Guardian
Guardian is in the BOLI market
however they work more so with
community banks
smaller banks
however their product is very attractive
and bank-owned life insurance
is different than whole life
my point is however
when you look at what banks are doing
with their cash value life insurance purchases
we see them often select
the major mutual companies
and other companies as well
however you'll often see the big 4
at the top of the list.
Corporations
so when you look at what corporations are doing
and want to copy them
meaning if a corporation
is taking out a number
of whole life insurance policies
on their executives
positioning the cash values
as an asset on the corporation's balance sheet
and setting up an executive benefit plan
what companies are they actually using?
You'll frequently see
the 4 major mutual companies
and then the wealthy
when it comes to individual policies
who are they often using?
When it comes specifically
to whole life insurance products
we'll see the 4 major mutual carriers
and the reason why
because if I'm a consumer
and someone's telling me this
that the 4 major mutual companies
are often the preference
of wealthy individuals
corporations and such
I would ask why
like why are they going to those companies
when there are a lot of other
life insurance carriers out there?
And the reasons why
there are a number of them
we've got their financial ratings
cream of the crop
if we were to look at their Comdex score
which really takes the different rating carriers
and almost gives a grade
you'd see each of these 4 companies
will range between a 98 and 100
100 obviously being the highest
so cream with a crop
when we look at their ratings.
When we look at their financial strength
size
strong as can be
they're also massive
when we look at their age
how long they've been in business
they've all been in business for over 160 years
so that's a long time
however to really button up that answer
why the 4 major mutual companies
I like the points under (3)
however the point under (1)
that's the most important piece to me
because if a company has phenomenal ratings
and they're massive in terms of their size
but they don't have any proof of performance
or they've always delivered
weak cash value returns to policyholders
I might not want a policy with that company
so on the topic of proof of performance
actual performance
on whole life insurance policies
if you're going to take notes
or take away one thing from this video
aside from the updated dividend rates
this would be it
and this will help avoid buyer's remorse
so the biggest source
of buyer's remorse that occurs when it comes
to whole life insurance policy sales
when cash value specifically
is the goal of the consumer
is often one takes out a policy
they see what is shown on an illustration
and they're often told by the agent
you should see value
similar to what this illustration displays
if it's several years ago
the IRR may have been over 5%
but then that policy underdelivers
meaning
you took that whole life insurance policy out
expecting to have a strong internal rate of return
call it 5%
but then the actual performance
ended up being 2% maybe 3%
that right there
is where an individual feels like
the reason I took this policy out
is because I thought I would have $1,000,000
but I only ended up with $600,000
why did this happen?
Or why was I not told this
could have been possible by my agent upfront?
And then there's a million reasons as to why
that's a whole other story
my point however
is when we look at buyer's remorse
what I just explained there
is often expressed by individuals
they got into the product
and found out after the fact
that it wasn't what they thought it was
so what we've seen
when we look at the actual data
this also mimics the corporate model
what corporations do
when selecting whole life insurance products
is looking at some historical performance
meaning real policies
that have lived the test of time
and what I've seen to be consistent
is when a whole life insurance policy
is taken out with (1)
1 of your 4 major mutual companies
and then (2) properly designed
meaning for very very high cash value
particularly on the guarantees
when that's maximized
that's where we see strong cash values
particularly based on actual results
not just Illustrated results
so historically when we look at policies
that were issued in the 1980s and 90s
and even early 2000s
we see that a 4% to 6% internal rate of return
on cash value
and we've got our historical case study series
which goes through policies that are issued
the oldest one we have is 1975
and then policies that were issued
meaning started in the 1980s
the 90s and then post 2000
but based on historical performance
we've seen ranges between 4% to 6%
however to set expectations properly
if I'm starting a policy today
I would expect the net internal rate of return
to fall somewhere in this neighborhood
somewhere between 3% to 5%
it could be a little bit better
if interest rates continue to climb
and then remain high for a long period of time
often what you'll see
with respect to dividend interest rates
is if the interest rate environment
experiences an increase
like it did back in the 1980s
eventually dividends will follow
where we see dividend rise
on the flip side when we look at post-2008
and interest rates bottomed out
for a long period of time
dividend interest rates did the same
they followed the interest rate environment
so to set expectations properly
and just looking at where we're at right now
with respect to the interest rate environment
and assets that are available
for insurance companies to purchase
I would expect the net IRR
on a whole life insurance policy
to fall somewhere between 3% to 5%
and of course
we always want to look at the guaranteed values
the non-guaranteed values
so we've got full transparency
on what it could be
especially the guarantees
with the worst-case scenario
but based on everything we've always seen
that is where I would set expectations
and I'm comfortable
when I look at my policies expecting that.
So that is some actual performance data
that's the biggest selling point
properly designed policies
with the major mutual companies
is when we've seen satisfied policyholders
based on real results
and then to wrap it up
so how do you choose
the right company for you?
Because we've got 4 companies here
and you might still consider smaller companies
there's nothing wrong
with smaller companies at all
especially if you're able to obtain
proof of performance from them
however if you're looking
at the 4 major mutual companies
and prefer them
how do you choose?
Because I can take 1 company
and show you 8 different
whole life insurance products which is a lot
so how do I select the right company?
Here is the biggest factor that often refines
an individual's decision-making process
this word right here flexibility
specifically how do I take
a high cash value life insurance policy
when I look at the cash value
you've got those core benefits
safe
liquid
tax-free
tax-free if we don't trigger a taxable event
such as a MEC of course
but when I have those
how do I take this product
and use it as a flexible savings asset
not a boring insurance bill?
An example
I want to be able to fund $100,000 per year
however Steve
I don't want a bill for $100,000 per year
so this right here is often step one
in helping an individual
refine their decision-making process.
Let's go through a quick example
this is you
you want to be able to pay in $100,000 per year
we can design a policy
with each of those companies
where you've got a minimum premium
of about $10,000 per year
and what that means
is we can throw everything else
into your PUA Rider
which is how we are going to accelerate
the cash value growth
and that $10,000 we'll assume for this example
is covering your term Rider as well
so when we look at the
fundamentals to policy design
if we want to be able to stuff money
into our PUA Rider
we will need a term insurance Rider
to prevent a MEC a taxable event
but if this is you
can you have a design like this
with any of the companies?
Yes, some companies allow you to go
a little bit lower than 10%
on the minimum premium
some will force a design
that has a little bit higher base premium
but you can get a minimum premium
with each of those companies
high upfront cash values
breaking even typically between 3 to 5 years
sometimes 4 to 6 years
but you can accomplish
a high cash value policy is my point.
What about this part though
flexibility
so here's the big difference
to give you 2 examples here
Guardian is extremely flexible
Guardian is a company
that if you have this design
you can commit to the minimum premium only
so call it $10,000 per year
so you can pay that annually
you can pay it over 12 months
you can pay the minimum however you want
and then 100% at your leisure
when it comes to adding money
into PUA payments
you can just throw them into the policy
you can do this through your online portal
your mobile app
you could even mail in a check
if you like to do it old school
but my point is it's extremely flexible
however to provide some additional awareness
to really hit the sweet spot
with a Guardian policy
max funding it for 10 years or less
meaning if I want the ability
to pay $100,000 per year
if I wanted to max fund it for 10 years
perhaps it's less but then nothing thereafter
or maybe pay just the minimum premium
that's really how you can maximize
a Guardian policy
however if you said
I want to be able to pay in $100,000 per year
but I want to do it for as long as possible
30 years let's call it
and I'm 40 years old now so up until I'm 70
if that's the case you can do it with Guardian
but it will be a challenge
what I recommend in this case is MassMutual
because from a company
and product limitation standpoint
we can design a policy
with a $10,000 minimum premium
funneling $90,000 toward PUAs
there's my total of $100,000 per year
you can do it for 30 years
you don't have to worry about a MEC
a taxable event anything like that
and you can continue to feed the beast
I like that saying
however
the item to be aware of with MassMutual
is it's not like Guardian
where I can just commit to the minimum
and pour in excess funds into PUAs
whenever I want
from an awareness standpoint
if it's properly designed with the right Riders
we can easily make payment adjustments
one time per year every year
provided that adjustment is made
on your premium due date
so for example
I could pay in $100,000 in the 1st year
then the next year
when the premium comes due
I'm billed for $100,000
but I say hey $100,000
is not going to work this year
let me scale it down to $50,000
maybe I pay $50,000 per year
for the next 10 years
then I want to scale it back up again
I can do that
provided the adjustment occur
on that premium due date
that's your policy anniversary date
and all companies have different rules and such
which we do have some content
that goes over that
and if you're working with us
we'll certainly provide that information as well
but I hope that was helpful
in terms of the updated dividend rates
and then some additional information as well.
If you did enjoy it please hit the like button
subscribe for more
if you have any questions
please leave them in the comments below
and as always I hope this helps.
Thanks so much.
Hey guys Steve Parisi here
if you enjoyed the content you just saw
please subscribe
like
and hit the notification bell
for future videos.
If you'd like more information
or to see some
custom policies for yourself
feel free to call
or email our offices
at the contact information below.