Mutual vs Stock Life Insurance: Making the Right Choice
If you are shopping for whole life insurance, you're probably aware of the two types of whole life insurance companies: mutual and stock.
Although both companies offer similar whole life insurance products, they differ in ownership and governance. One company is controlled by investors and shareholders, while the other is led by its policyholders.
So, which option is right for you?
In this comprehensive guide to mutual vs stock life insurance, we've compared these two types of whole life insurance providers. Our goal is to help you determine which company structure is ideal for your specific needs.
Quick Article Guide
Here’s what we'll cover in this post:
What's The Difference Between Mutual and Stock Life Insurance?
In the life insurance industry, there are actually two main types of whole life insurance providers, mutual and stock. A mutual life insurance company is owned by the policyholders or customers themselves, while a stock life insurance company is owned and controlled by its shareholders and investors.
Mutual insurance companies are bound by the preferences of their policyholders, who typically benefit from premium discounts and dividends during profitable years. In contrast, stock insurance companies are overseen by shareholders and investors who aim to yield profits from their investments.
In the table below, we've outlined the three primary distinctions between a mutual and stock life insurance company. Understanding these differences can assist individuals make an informed decision when choosing the best life insurance provider for their needs and financial goals.
Mutual vs Stock Life Insurance Company
|Mutual Company||Stock Company|
|Ownership||Owned by the policyholders||Owned by investors and shareholders|
|Profits||Profits are returned to policyholders through dividends and discounts||Profits are paid to company investors and shareholders|
|Leadership||Decisions are made by policyholders who vote on the company's future||Decisons are made by investors and shareholders to generate profit|
What Are The Benefits of Mutual Life Insurance
As mentioned earlier, one of the most significants advantages of purchasing your life insurance policy from a mutual life insurance provider is the potential to earn dividends or recieve discounts on your policy premiums during prosperous periods. For instance, Penn Mutual has a remarkable history of consistently paying dividends to their policyholders for the last 175 years.
In fact, the top five mutual life insurance providers have consistently awarded their policyholders with annual dividends for at least six decades. This extensive track record of dividend payments reflects positively on the reliability and trustworthiness of these companies.
Additonally, mutual life insurance policyholders also have a voice in their company's operations and can participate in decisions that will influence the company's future. As stated in MassMutual's proxy statement, "If you are insured under an individual policy of life or endowment insurance issued by MassMutual, you are a member of the Company and are entitled to one vote."
What Are The Disadvantages of Mutual Insurance?While a mutual life insurance provider is the preferred choice for the vast majority of people, there is one drawback. The primary disadvantage of a mutual life insurance company is it's abilty to generate capital. While a stock company can sell shares, a mutual company must rely on the funds it collects from its policyholders.
Because of this, mutual company's tend to favor conservative investments with long-term stability whereas stock life insurance companies are more inclined to pursue riskier investments with the potential for higher returns. While these strategies differ significantly, their direct impact on the policyholder is minimal.
The life insurance industry is heavily regulated to protect consumers. Companies must demonstrate an abilty to meet their financial obligations, or they will be forced to stop writing new business. If this occurs, existing policies will be transferred to a new company by the state's insurance commissioner to ensure claims are paid.
To delve deeper into your state's reinsurance process, please see our article, "Will My Life Insurance Still Be In Business In 10 Years?" While life insurance providers are generally considered "too big to fail" and seldom encounter solvency issues, it's reassuring to know that preparations have been made for such contingencies.
An Overview Of The Best Mutual Life Insurance Companies
Currently, there are only five major mutual life insurance providers operating in the United States. These companies represent the largest and most competitive whole life insurance companies in the industry today. We've provided an overview of each of these providers below:
1. Penn Mutual - Penn Mutual was founded in 1847, and they are rated A+ (Superior) by AM Best for their financial stabilty. In 2019, the company collected $3.7 billion in revenue and made $396 million in profits. They currently employ more than 3,000 people, and their policies are available in every state except New York.
The company has consistently paid dividends to participating policyholders for nearly 175 years. In 2022, Penn Mutual awarded more than $173 million dollars to its eligible policyholders.
2. MassMutual - Mass Mutual was founded in 1851, and they have the highest rating from AM Best for their financial stability, A++ (Superior). The company is ranked 100th on the Fortune 500, and they currently manage more than $312 billion dollars in assets. Their insurance offices can be found in every state except Alaska.
MassMutual has paid dividends to eligible policyholders every year since 1869, and in 2022, the company paid out an astonishing $1.85 billion dollars in dividends.
3. Guardian Life - The Guardian Life Insurance company was founded in 1860 as a mutual and stock provider. In 1925, the company transitioned to mutual ownership only. In 2022, Guardian Life reported more than $11 billion in assets, premium growth of 6%, and an operating income of $1.7 billion.
In December 2022, Guardian announced its biggest dividend payout in over 161 years, a staggering $1.13 billion dollars. According to their website, the company has paid dividends to their participating policyholders for at least 63 years.
4. New York Life - New York Life is the largest mutual life insurance company in the United States. In 2023, they managed more than $670 billion in assets and employed more than 15,000 people. Unfortunately, the company has a less than stellar reputation due to their poor customer service.
Despite their lack of customer support, the New York Life insurance company has paid dividends to its eligible policyholders for the last 168 years.
5. Northwestern Mutual - Northwestern Mutual was founded in 1857, and they currently manage more than $277 billion in assets. In the year 2022, the company marked its most successful year to date, with premanent life insurance sales surpassing $1.1 billion in annual premiums.
The Northwestern Mutual life insurance company has paid a dividends to eligible policyholders every year since 1872. During this time, they have awarded more than $150 billion dollars in dividends to their members.
To learn more about these providers and the policies they sell, you can call us at 855-247-9555. Our independent agency represents 63 top-rated life insurance companies, and we can quickly match you with the best option available based on your needs and health profile.
The Bottom Line
Mutual life insurance companies offer numerous advantages over stock life insurance companies, but every insurer sets its own rates and approval guidelines. This is why it's so important to work with an experienced life insurance agent that can help you navigate your options and make an informed decision.
Our agents have at least ten years of experience, and we've assisted thousands of families and businesses with their life insurance needs. Most importantly, our comparative shopping services are completely free and there is no cost to apply for coverage.
To get started, select your state from the map below to instantly compare whole life insurance rates from dozens of providers, or call us toll-free at 855-247-9555 to speak with one of our experts. We're licensed in all 50 states and DC.
Managing Partner and Co-founder
Cliff is a licensed life insurance agent and one of the owners of JRC Insurance Group. He has helped thousands of families of businesses with their life insurance needs since 2012 and specializes with applicants who are less than perfect health. In his spare time he enjoys spending time with family, traveling, and the great outdoors.