What is Mutual Whole Life Insurance?

Mutual whole life insurance is an older term that was first used in the 1940s and 1950s to describe not just whole life insurance, but also the type of company that administers the policy. It's the same principal as a mutual fund, where individuals combine their financial resources to buy-in to different investments collectively, only in the case of life insurance we're talking about who gets the money when your investments (premiums) perform well.

Mutual vs. Regular Whole Life Insurance Companies

If you invested $1,000 and received a 10% return over the course of one year (or $100), a "regular" life insurance company would give you a portion - not all - of that return. Why? Generally, there are fund managers, administrative staff, and other individuals responsible for generating that investment, and these people tend to operate off of a commission or performance-based pay which affords them a "cut" of whatever they bring back. While this is also the case for mutual whole life companies, the major differentiating principal is the fact that you, the consumer, are the sole investor. Regular whole life insurance companies are usually publicly traded, which means they have an obligation to pay dividends to their investors. That's where your money goes.

Which is Better - A Regular or Mutual Whole Life Company?

Most life insurance firms or brokerages are publicly traded, so the idea of a purely mutual whole life insurance company is more or less dead in this modern financial environment. Whole life insurance products are also very heavily regulated due to the nature of who they're intended to protect, which means smaller firms are few and far between. Most major, main-stream whole life insurance policies guarantee a certain rate of return regardless of market conditions, which is why this type of policy is such an attractive investment vehicle. If the market under-performs and the insurer still needs to pay the guaranteed rate of return to your policy, guess where it comes from - the investors on Wall Street! It is, therefore, a two-way street, with larger companies able to provide you with better protection and stable returns, even though they might not be 100% of what your money is earning in the open market. Bottom line: mutual whole life companies do exist, but they come with additional risk factors that most consumers prefer to avoid. For this reason, LifeInsuranceRates.com works with the country's most trusted whole life insurance providers to make sure your investment and your death benefits don't go anywhere. To compare rates from insurers, just use the form at the top of this page.