Please Help Me Understand ..dividend Regards to Mutual..to Buy Mutual or Not

[insurancemet]

Hello,

I read somewhere that mutual pays dividend as a result of getting back money from overprice premium. My question is paying a higher premium for mutual policy; are they worth it to get dividends back...if so, then would it not be in the clients best interest to just sell mutual..if not why.

I had an interview with AGLA in the past but turned from it because of the AIG scandal not really understanding how it is all related. My question is I hear Mass and NY Life etc client is more white collar vs MoO and Agla more for the blue collar.
I have all those people in my life but probably would feel more comfortable selling Agla in volumes vs fewer Mass or NY life..not even sure if that is how it would all work out.

My question that I really want to know is for yourself and family, would you rather own a mutual policy such as Mass or a less price policy like Agla and why...also really want to know if dividend are worth paying a higher premiums for. Thank you.

 

[DHK]

If you believe that mutual companies ACTUALLY "overcharge" their premiums... then you need to understand how insurance companies interact with the IRS.

Yes, mutual companies declare a dividend because they have a SURPLUS and return it back to their policyholders. (Policyholders are the owners of mutual companies.) The IRS wanted to TAX that dividend. So, to protect the tax advantage, what does the insurance industry do? They called it a "return of overcharged premium" so it would NOT be taxed.

However, you have a bigger problem: You are putting product BEFORE defining your market. The product is MEANINGLESS until you define your market.

Once you define your market, then you recommend the appropriate product... based on UNDERWRITING, then price.

If you have a fantastic product, but you would only get it issued to 1% of your market that you can see on a favorable basis... you'll fail.

If you have a GOOD product, that can be issued to 75%+ of your market... you'll do great.

So your question regarding mutual vs stock... is moot until you decide whether you're going to focus on the blue or white collar markets.

 

[rousemark]

The US Supreme Court ruled that a life insurance dividend was a refund of excess premium. DHK's point is illustrated by the fact this is acknowledged in Mass Mutual s own literature on page 7.

http://www.massmutual.com/mmfg/pdf/li_policy_dividends.pdf

 

[xrac]

I own a Guardian dividend paying WL policy on myself and my wife. However, most people are more apt to buy what AGLA sells.

 

[Newby]

And to make it more confusing, not all mutual policies pay dividends.

And some stock companies do pay dividends (Prudential, Met Life, etc.)

 

[rousemark]

I own a Guardian dividend paying WL policy on myself and my wife. However, most people are more apt to buy what AGLA sells.

If you compare AGLA's IUL with a par policy using the exact same premium, it will compare very favorably.

 

[insurancemet]

Thanks to all who replied. I appreciate it. I'm still left wondering however..

Let me ask this way..If a man bought a policy say a whole life $100k from Agla and another one from Mass or NY Life..and he was approved for both.

Which one would end up having a higher cash value?

Which one would be more expensive, am assuming the mutual company, and if so, would the fact that it does pay dividend justify the higher premium?

I saw an ad for a NY Life, it states something since we are owned by the policyholders we have the same goal mainly having their best interest at heart, I guess compared to a stock company who are own by the shareholders, do you all think this is true and really a selling point?

Xrac, you bought Guardian, why? Is it because more cash value, dividend? You pay more than you would for Agla, I presume, so basically trying to understand why would someone pay for a higher end product..

I'm trying to see if indeed I work for a mutual company and most of them sells on the point among others that they pay dividend, how would someone who is selling an insurance that doesn't pay dividend compete? And if I do go captive with Agla, how would I respond to someone who says no, I would rather get NY Life because they are mutual and pays dividend. So I"m trying to see if mutual/dividend is really worth the cost..also shopping for myself. Thank you.

 

[Josh]

Which one would end up having a higher cash value?

I'm sure someone will correct me if I'm wrong, but wouldn't an illustration from each company (and a crystal ball) be the best way to answer that question?

 

[xrac]

I wanted WL not UL. I wanted something permanent with a guarantee. Guardian is about as strong a company as is out there. I might have been able to do better (maybe) but not by much with anyone else. Here is a thread you may want to read on this subject Looking For a Whole Life Policy.

 

[Franz Kafka]

I own WLs from mutual companies and term from cheap premium companies. You should do the same cause I know what the xxxx I'm doing.