Should you switch to the Sun Life brand?

By a Consumer Reports Money Adviser June 2010

This article appears at the following website: consumerreports.org

Sun Life Financial has launched a major advertising campaign to increase its brand recognition in the U.S. "With over 20 million customers," says a voice-over for a TV ad, "we should be a household name. And we will be." Cut to two actors portraying company employees trying to persuade the head of the Florida State Tourism Department to change its slogan from "the Sunshine State" to "the Sun Life State." In another ad these same lads meet with the '70s funk group KC and the Sunshine Band. The offer: The insurer will pay for an upcoming tour, and in return, the group becomes KC and Sun Life Band.

Though this Ontario-based company is not well-known in the U.S., it's been around since 1865. One of five Canadians has purchased Sun Life products and services, which include annuities, life insurance, and investment management. We looked it over to see if it's worth getting familiar with the brand.

The real deal

When you're picking an insurer that you plan to do business with for many years, it's safest to sign up with one that has earned the very top financial-strength rating from an independent rating agency. However, TheStreet.com, which we found to be the most accurate agency for rating insurers during the market meltdown, gives it only an average rating.

The company sells both fixed and variable annuities. Its fixed immediate annuities pay an interest rate above the industry average (but not the best available) for men, according to data compiled by ImmediateAnnuities.com. Women get less than the industry average.

Sun Life's variable annuities charge especially high fees. They carry total average annual expenses of 2.5 to 3 percent. The industry average is 2.4 percent, according to Morningstar, an investment research firm.

You may find higher-paying fixed annuities from the North American Company for Life & Health, USAA, or others. We've never been fans of variable annuities because of their high cost. But you can get cheaper (and better performing) ones from Vanguard or Fidelity.

Sun Life also sells universal and variable universal life insurance, which are essentially life-insurance products bundled with an investment account. Consumer Reports has long preferred term life instead, mainly because it's a much better deal. For example, a February 2010 CRMA investigation found that a 49-year-old male California resident in top health could get a $1 million term life policy for level monthly premiums of about $160 vs. about $760 for the same coverage with a whole-life policy (which is similar to universal life).

Morningstar gives Sun Life's MFS mutual funds a so-so rating, with a median score of three out of five stars. By comparison, Vanguard funds have a median four stars for performance.

The bottom line

Only consider variable annuities if you don't have access to other tax-sheltered accounts, such as a 401(k) or IRA, or if you've already maxed them out. Otherwise, we suggest that you invest directly in low-cost mutual funds that outperform their peers.

If you opt for term life insurance, shop for the best deal by using such online brokers as AccuQuote.com, FindMyInsurance.com, and LifeInsure.com.