Why Whole Life Insurance from Guardian
When evaluating any form of permanent (cash value) life insurance, choosing
which plan & company to go with can be difficult. This is because with cash value life insurance, the lowest annual premium (price) may not be the most competitive
contract. The highest rated company (from the major rating agencies) may not be the most competitive contract. While life insurance is a commodity, it should
not be purchased with typical commoditized behavior. After extensive research, the following are a few reasons why I recommend Guardian Life Insurance Company
in most instances.
Market (Price) CompetitivenessWhen I receive a quote (or illustration/projection) for whole life insurance, I'll typically request them from the four major mutual life insurers. Premiums are all similar, but usually the policy with the lowest premium is not the most competitive. I like to use a simple calculation which computes the Internal Rate of Return (IRR) on both cash value accumulations and death benefit. The IRR on cash value shows the percentage of cash value relative to premiums paid... this will show which policy grows the accumulated equity faster. The IRR on death benefit shows percentage of death benefit relative to premiums paid. In both cases, the higher the number - the better. For whole life, both of these ratios are made up of both guaranteed elements and non-guaranteed projections. The primary driver of the non-guaranteed elements is the dividend (by definition, the return of unused premium back to the policy holder). Typically, the higher the dividend - the better.
- When comparing cash value and death benefit IRR for a male, age 45, for $1 million of whole life, Guardian has the highest IRR on cash value after both 20 and 30 years, AND the highest death benefit IRR after 20 and 30 years. In addition, the distance between Guardian and the company with the 2nd highest IRR increased from 2010 to 2011 suggesting to me a trend of improved performance and market competitiveness.
Strength, Solvency & Ability to Pay ClaimsClearly recent national and world economic events has shown that investing with solid companies is critical to the decision making process. Given that life insurance is, essentially, a promise to pay after a long period of time, performing due diligence on insurance companies is critical. This exercise should go beyond just looking at ratings. Guardian not only receives very high ratings from all the major rating agencies, but they were the only major company to receive an UPGRADE in 2008 when most of the insurance companies were receiving downgrades due to the economic climate. In addition, I like to look at the Capitalization Ratio (Cap Rate) which shows company's capital as a percentage of total assets. In essence, this is the company's ability to pay claims.
- Over the last 5 years, Guardian has the highest average cap rate than any of the other major insurers, trending upward leading the industry in 2008 and 2009.
In conclusion, the combination of market competitiveness when considering IRR on cash value and death benefit, combined with the strength as validated from the major rating agencies and confirmed with the highest cap rate in the industry, is why I recommend Guardian whole life insurance more than any other single company.