Northwestern Mutual Life Insurance Review: Low Rates and a Wide Variety of Options
Editor's Rating
Northwestern Mutual is a reputable insurer, whether you’re looking for term or cash value life insurance. Northwestern Mutual’s term policies have competitive rates, particularly if you’re older or a smoker, and the company's permanent life insurance policies have many payment options. In addition, its CompLife product allows you to combine term and whole life insurance coverage to fit your financial situation, as your life insurance needs may change with time.
However, Northwestern Mutual doesn’t offer no-medical-exam life insurance policies or a wide variety of term lengths. So, if you have significant pre-existing conditions or are looking for term coverage for a particular amount of time, you may want to consider a different insurer.
Northwestern Mutual Life Insurance Products
Northwestern Mutual is one of the largest life insurance companies and offers a full spectrum of products, including term, whole, universal and variable life insurance. It also offers its own CompLife policy with the combined benefits of term and permanent life insurance. The only policies not offered by Northwestern Mutual are those with limited underwriting, meaning it doesn't have options for people with significant pre-existing conditions or who are looking to purchase life insurance very quickly.
All of Northwestern Mutual’s permanent life insurance policies build cash value and you, as the policyholder, are eligible to receive dividends. In addition, these policies come with an Additional Purchase Benefit, which is the option to increase your policy’s face value at certain points in time. If your financial situation changes and you want more coverage, you could increase your policy’s death benefit without demonstrating your insurability. However, this option is only available after certain life events, such as when you turn 40 or have a child.
Northwestern Mutual’s policies allow your beneficiaries to choose how they receive the death benefit if you pass away. Your family can take a single payment or a series of payments, in which case Northwestern Mutual would pay interest on the proceeds.
Northwestern Mutual Term Life Insurance
Northwestern Mutual offers four different term life insurance policies:
- Level Term 20: A traditional term life insurance policy, Level Term 20 has level premiums for the entire term length and offers coverage for 20 years.
- Level Term 10: This policy actually offers coverage for 20 years, similar to purchasing two 10-year term policies. Premiums are level for the first 10 years and last 10 years, but they increase after the end of the first period based upon your age. While initial premiums are lower, average rates over the 20-year period may be higher compared to the Level Term 20 policy.
- Term 80: This is an annually renewable term life insurance policy, meaning you lock-in coverage for one year at a time. Rates can increase each time you renew. So, rates will start lower than they would for a longer term policy but increase significantly over time. This policy remains renewable until you turn 80.
- Term 10: Similar to the Term 80 policy, Term 10 has annually renewable coverage for 10 years. After the 10-year period, you would need to purchase a new policy to remain covered.
Northwestern Mutual’s rates for term life insurance aren’t the cheapest, but are very competitive when compared to similar insurers. We compared the annual cost of a Level Term 20 policy against some of the largest insurers for three common life insurance shopper profiles:
Find Cheap Life Insurance in Your Area
As you can see, Northwestern Mutual has somewhat average rates for young and healthy shoppers. However, they are cheaper than any other company in our sample for smokers and seniors.
All of Northwestern Mutual’s term life insurance policies offer the option to convert your coverage to permanent life insurance with guaranteed acceptance. There’s no additional underwriting and your new premiums would only be determined by your age and the type of coverage. While this feature isn’t available through every insurer, it's typically an option with insurers that also offer permanent life insurance policies.
If you’re undecided between term and permanent life insurance, the option to convert your coverage can be valuable if you get sick later, because the insurer won’t take this into account. However, take note of exactly when you’re able to convert your policy. With Northwestern Mutual, this has to be done within a certain number of years of purchasing your term life insurance, and the number of years varies according to the policy.
Northwestern Mutual Whole Life Insurance
Northwestern Mutual’s whole life insurance policies provide lifetime coverage with level premiums and can be purchased until you turn age 85. The minimum death benefit is $25,000, but you should be able to get as much coverage as you need. Its whole life insurance policies have a cash value component that grows at a guaranteed rate over time. The cash value is the amount of money you would receive if you were to give up your coverage, but it can also be used to borrow money from the insurer in a policy loan.
The company offers three types of whole life insurance policies, with the difference being the period of time during which you pay for coverage:
- 65 Life: You pay level premiums until age 65, at which point coverage remains in place but there are no further payments.
- 90 Life: You pay premiums until age 90, after which point your coverage continues but there are no more payments.
- Limited Pay Life: You choose how long you pay for coverage, from 10 years to 30 years, based upon how much you’re comfortable spending in a given year.
If you become seriously ill, Northwestern Mutual’s whole life insurance policies give you the option of receiving your death benefit while still alive. This feature is available with most insurers and can be valuable if you would otherwise have difficulty paying for significant medical expenses or supplementing lost income.
Since Northwestern Mutual is a mutual insurance company, it is owned by the policyowners and whole life insurance policies are participating. This means that if Northwestern Mutual collects more money in a particular year than is spent, the company issues a dividend to those with permanent life insurance policies. These dividends can be taken in cash, used to pay premiums or used to purchase additional coverage. Dividend returns aren’t guaranteed and vary in size, with Northwestern Mutual’s actually decreasing over the past several years, but the company has consistently issued them for decades.
Northwestern Mutual CompLife Insurance
Northwestern Mutual’s CompLife product is essentially a combination of whole and term life insurance, and you choose how the coverage is divided.
Say you bought a $500,000 CompLife policy in order to cover a mortgage and leave an inheritance to your children. You could choose for $400,000 of the coverage to be term and $100,000 to be permanent, if that amount corresponded to the size of your mortgage. Or, you could have $200,000 of term coverage and $300,000 of permanent coverage if your mortgage was smaller and you want to leave a certain amount of money to your family.
Depending on the CompLife policy, premiums may be guaranteed to stay level for a period of time, but this isn’t always the case. To reduce costs and increase the policy’s value over time, Northwestern Mutual lets you use dividends to purchase paid-up whole life insurance. These are essentially miniature policies that replace the policy’s term coverage (lowering your premiums), increase the permanent death benefit, and add to the policy’s cash value.
CompLife is a helpful product from Northwestern Mutual if you have both short and long-term life insurance needs and want to diversify your portfolio with a cash value policy. However, if you need both term and permanent coverage, but aren’t interested in the cash value component, you should also consider combining guaranteed universal coverage and term coverage. Though these can only be purchased as separate policies, guaranteed universal life insurance has little to no cash value, so it’s considerably less expensive for permanent coverage than whole life insurance.
Northwestern Mutual Universal Life Insurance
Similar to its whole life policies, Northwestern Mutual’s universal life insurance policies are fairly traditional but offer multiple payment structures:
- Single Premium: You make a single large payment when purchasing the policy, and there are no further payments.
- Customer Universal Life Accumulator: This is a standard universal life insurance policy which is paid for annually or monthly (depending on your preference).
Choosing how to pay for your universal life insurance policy may sound like a simple decision, but it can make a significant difference in your finances. Not only does the single premium option eliminate one of the core benefits of a universal life insurance policy—flexible payments—but you need to confirm if this policy will be a modified endowment contract. Certain cash value life insurance policies can become modified endowment contracts if they’re paid up over a shortened period, which can have negative tax implications.
For example, if you withdraw money from the policy’s cash value before age 59.5, you would be hit with a 10% tax penalty. In addition, your withdrawals would be taxed on a "last in, first out" basis, meaning you’d immediately pay taxes on investment gains.
Aside from their payment structure, Northwestern Mutual’s universal life insurance policies are similar to those available from other insurers. The cash value grows according to a rate determined in the policy, and the amount can be borrowed against. Premiums are flexible; you can pay more in certain years to drive up the cash value and less in other years using the cash value to meet the minimums. As with their whole life policies, Northwestern Mutual’s universal policies are participating, meaning you are eligible to receive dividends.
Northwestern Mutual Variable Universal Life Insurance
Northwestern Mutual offers three variable universal life insurance policies:
- Custom Variable Universal Life: This is a standard variable universal life insurance policy. Its cash value can be used to pay premiums, and you can choose how to invest the cash value from a set of options which are similar to mutual funds.
- Executive Variable Universal Life: This policy is similar to Northwestern Mutual’s Custom Variable Universal Life policy, but can be purchased by employers as a form of key man life insurance.
- Survivorship Variable Universal Life: This is a type of joint life insurance that insures both you and another person, typically a spouse. The policy pays a death benefit after you’ve both passed away, so is typically purchased in order to leave an inheritance or cover estate taxes for your children.
For each of these policies, Northwestern Mutual provides a range of cash value investment options with low expense ratios, though the majority are their own mutual funds. In addition, Northwestern Mutual offers the option of paying a higher premium to guarantee the death benefit, an option that’s not standard for most variable universal policies.
However, there are no guaranteed returns on your cash value investments, and your premiums may increase over time if your cash value performs poorly. These restrictions are standard for variable universal life insurance and contribute to the policy’s "higher risk, higher potential return" tradeoff.
Northwestern Mutual Customer Reviews & Complaints
Northwestern Mutual is a suitable choice if you’re looking for one of the best life insurance companies for financial strength ratings and a reputation for few customer complaints. Their A++, or Superior, A.M. Best rating indicates Northwestern Mutual’s ability to pay claims.
In addition, Northwestern Mutual’s 0.03 NAIC Complaint Ratio demonstrates that it has very few complaints as compared to the amount of business it writes. The company also has four out of five stars in J.D. Power’s customer satisfaction rankings.
Northwestern Mutual does have some negative customer reviews which are primarily focused on its agents’ tendency to push permanent life insurance to consumers over term coverage. Permanent life insurance policies, particularly those that build cash value, only make sense in certain situations, but agents make higher commissions by selling them. If you’re considering Northwestern Mutual, you should research the coverage you need before meeting with a representative.