Life Insurance Ratings

There are hundreds of insurance companies out there. Almost all of them are bear the name “American”, “National” and “Safety”. So which of these insurance companies are you going to choose? Are you just going to base it on the name, its advertisements or its financial strength? If your basis for choosing the best insurance company is its financial strength, then you are on the right track; you just need to check on the life insurance ratings of these companies.

Life insurance ratings are essentially letter grades assigned by insurers based on the company’s financial strength. These ratings are important as these are assurances that the company will be able to pay you once you file for a claim.

Life insurance ratings are given by independent services based on an insurance company’s financial strength. These ratings are determined by independent analysts who are paid to do a review of the company’s financial strength.

If the company receives a relatively poor rating, it might mean that it may not be able to deliver on time a payout to a customer who has always paid his/her premiums. That is why a company’s rating is more important than its customer service, policies, and premiums. None of these things will matter if the company goes bankrupt.

Some of the leading life insurance ratings companies are A.M. Best and Company, Standard and Poors, Moody’s Investor Service, Fitch, and Weiss Ratings, Inc. The ratings are just like the grades in school with A being the highest, then B, and so on. Of the five ratings companies, A.M. Best  is the oldest, it being established in 1899. It was named after an agent who was frustrated at the lack of financial information about insurance companies. A.M. Best has developed a ratings system for life, general and reinsurance companies on the basis of the company’s strengths and weaknesses.

The ratings are as follows:  A++ or A+ (Superior), A or A- (Excellent), B++ or B (Very good), B or B- (Fair), C++ or C (Marginal), C or C- (Weak), D (Poor), E (Under regulatory supervision), D (In liquidation), and S (Rating suspended). A B+ rating or better is an indication that the company is secure in four critical areas which are underwriting, expense control, reserve adequacy, and investments.

Almost all companies get an “A” in one form or another. A company which has a life insurance rating of B or lower should not be considered. So, before making that long-term commitment to a specific life insurance company, it is very important to check out first its financial rating. Good thing that this information is available in the company’s website. It is also advisable to check the ratings in other sources.

If there is an agent selling you a life insurance then you asked him about the company’s life insurance rating and no answer was given or he is not knowledgeable about it, you should see a red flag unfurl. If he/she happens to know the ratings, you may ask the agent to explain these things to you in simpler terms.

Life insurance rating is very important – and it is more important to research on this with multiple sources now than being sorry later on. Also, the life insurance company should at least be rated by three of the five rating services and should have one of the three of its top ratings or at least two of those services. There should be no rating that is below the service’s fifth best score.