Allstate Life Insurance Company Review

Allstate was founded in 1931 and began as part of Sears, Roebuck & Co. The company had the largest initial public offering (IPO) in U.S. history in 1994 and became totally independent one year later. The company headquarters are in Northbrook, IL and now has 14,000 agents and 37,000 employees throughout the U.S. Allstate is currently the largest publicly held insurer for personal lines. The brand is well known and carries a strong public image, especially with folks that new and appreciated the Sears retail juggernaut of years past. ‘You’re in good hands… with Allstate’ is a jingle that most people will recognize and many can complete on queue.

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Strong Financial Ratings

Allstate gets strong ratings from the independent rating agencies. AM Best gives them an ‘A+’ or superior rating, placing them high among rated companies. Standard & Poor’s rates them as very strong, providing an ‘AA-‘rating. Moody’s also rates them ‘good’ and offers an ‘A1’ for their financial strength and ability to meet obligations.

Term Life Insurance

Allstate has traditional term insurance policies with guaranteed level premiums and most can be converted to permanent insurance. Level premium terms are available in periods of ten, fifteen, twenty, and even thirty years.

The company suggests term policies for those seeking low cost life insurance or to supplement another life policy. Families with kids or mortgages may desire the less expensive option of term insurance to protect remaining family members from financial hardship in the event of a death.

Whole Life Insurance Still Available

Allstate is a traditional insurer, building the life book from its immense property and casualty book of business. In suit, they continue to offer a traditional whole life policy. This version of permanent insurance will have level premiums guaranteed for life. Cash value will accumulate in a guaranteed rate fixed account designed to mature to face value at age one hundred.

A Side Note on ‘Guaranteed Rates’

Just to be clear, many companies like Allstate and others offer this guaranteed rate. This terminology can be a bit confusing because the RATE CAN CHANGE. The policy owner needs to be clear that the company is guaranteeing to pay its ‘declared’ fixed rate, which will be calculated each year based on current fixed debt interest rates. If market interest rates go up, insurance companies usually raise their rates and vice versa.

This occurs because the insurance companies buy bonds and other fixed income securities with the cash accumulating in accounts. The cash value is accessible by the policy owner through loans or partial withdrawals. If loans aren’t repaid, they will simply be deducted from the death benefit upon the policy owner’s death.

Universal Life Insurance with Allstate

Allstate currently offers universal life policies with a large amount of flexibility. The policies allow for flexible premiums as well as an adjustable death benefit. This is the optimal design, as it provides the owners maximum flexibility as cash values, needs, or income change – the policy can change with them.

The universal life policies are permanent insurance, and offer access to the cash value through both loans and partial withdrawals. Allstate also offers a guaranteed minimum interest rate on the UL’s to keep the cash value going in the right direction.

The fixed security portfolio in Allstate’s book is rated to be very good. This means that the rates they pay may be slightly lower but the fixed income securities have less risk of defaulting. As less risk is involved with the investments, the bond and security issuers offer lower interest rates to investors.

Variable Universal Life Insurance

Allstate continues the flexible universal life policy offering with their variable version. The policy carries ultimate flexibility with both premiums and death benefit. The only difference being that there is no guaranteed rate and variable securities are available.

They currently offer a wide variety of leading mutual fund companies, money managers, and institutional investment options. Portfolios range from conservative and fixed accounts to aggressive growth allocations. Risk tolerance and time horizon should be considered when selecting suitable portfolios and variable investments.

Equity Indexed Universal Life

In addition to variable universal life, or VUL, Allstate also offers an equity indexed policy. This policy retains all of the flexibility of the other UL’s, the only difference being the investment mirrors market indices.

Allstate offers varying participation in the market index, which will be determined at the inception of the policy. What this means is that the policy owner can choose to build in some downside protection, protecting the cash value from losses in a down market.

Remember, the trade off for choosing a guaranteed minimum return will mean a sacrifice of full participation in years the market has gains. For example, in a policy where the guaranteed minimum is 2% and the upper cap is 10%, the policy owner will not benefit fully when the market is up 15% and only receive credit for 10% of the total gain of the investment.

Summary and Notable Strengths

In summary, Allstate is a good option for insurance. They have built a solid reputation in personal lines of property and casualty insurance, but also have a sound foundation for life insurance. The company is financially strong and receives high ratings when compared to other insurers.

The most notable policy they currently offer is the Universal Life Insurance policy. The flexibility with both premium schedules AND death benefit within one policy is very attractive. This means that when cash values change the policy owner can choose to vary or even omit premium payments. Additionally, the policy owner will have the option to increase or decrease the death benefit if they choose not to alter premium payments.

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