Understanding Life Insurance Company Ratings
Life insurance companies are reviewed and ‘rated’ based on their financial strength and how they do business. There are four major rating services– A.M. Best, Moody’s, Fitch, and Standard & Poor’s. Insurance companies can be rated by all four services, or as few as two; however most are rated by at least three. The rating companies review all financial aspects of an insurance company; how much premium they receive, how much death proceeds are paid out, to how many policies lapse within the year, just to name a few. They may also review customer service items, how they respond to inquiries, how they handle complaints - as well as the number of complaints received.
A rating is a grade, like in school – the higher the rating, the better (more secure) the company. For A.M. Best, if a life insurance company gets an A++ or an A+ – that’s a Superior grade. A or A- is Excellent, B++ and B+ is Very Good, B and B- mean Adequate, C++ and C+ mean Fair, C and C- is Marginal, D means the company is Very Vulnerable, a rating of E means the company is under State Supervision and the lowest rating is an F, which means the company is in liquidation to be dissolved.
As you shop for insurance, always review an insurance carrier’s ratings along with premium costs. Remember, by purchasing their policy, you’re investing your monies with them to ensure they will be able to pay out your life insurance death benefits when needed.
If you are looking for permanent insurance, you’re not only looking for the death benefits to be paid, but also for the cash value growth to be available for your future needs. You won’t want to pay premiums into a life insurance policy with a company whose ratings are below average, even if the premium costs seem better.
Shop wisely and don’t be afraid to ask questions.
About the author: Melanie Tretheway has been in the life insurance business for over 30 years. She is a mother of two who loves baking, reading, gardening, and taking care of her family. Melanie takes great pride in making sure you are informed, especially when it comes to choosing the right life insurance policy for your family. You can contact Melanie at 1-800-651-1953 or MTretheway@Pivot.com.