Credit Checking Life Insurance Companies
Most adults know what a FICO score is. They may not know how it works, how it’s calculated, or how it got its name but they do know that their financial lives are determined by that score. A good score means lower interest rates, approvals and opportunity. Conversely, a poor score means you’ll be asking for cosigners and paying more than those with good scores until you become one of the people with a good score. That score essentially measures your credit worthiness. A quick google search yields the definition of credit to be “the ability of a customer to obtain goods or services before payment on the trust that payment will be made in the future”. Companies use that score to determine what will be made available to you (house, car, college, etc…) and at what price. The ability to meet obligations is vitally important, as witnessed by the financial meltdown a few years ago. When it comes to buying life insurance, the financial ratings of the company you choose matters.
When you purchase life insurance, you are transferring risk. I understand that you are paying for coverage but what happens when there is claim? A life insurance carrier’s ability to meet its obligation matters. Using numbers from census.gov, the number of US life insurance companies has gone down from 2,195 in 1990 to 946 in 2009. Some companies may have had a smooth transition out of the industry, but some have failed. Although there are protections in place to make sure customers still maintain some coverage if their insurer goes belly up, depending on how much coverage you had, you may have a significant reduction in coverage. For those companies with their heads barely above water, how comfortable would you be, knowing that the company that you’re with might not be able to or dragged its feet to pay the death benefit to your loved ones if you passed?
If you have coverage now, do you know the financial rating of your insurer? If you are looking to get life insurance, have you thought to ask what the financial ratings of the company(ies) you’ve inquired about are? If you’re like most people, you want the best deal. I’ve heard the following said about many goods and services, “good isn’t cheap and cheap is good”. Think to yourself, how hard is it to get money from someone on shaky financial ground? Anyone who filed claims from Hurricanes Katrina or Sandy knows that some insurance companies give their money/pay claims grudgingly. Unfortunately when an insurance company falls behind, you cannot charge them fines and/or fees. Financial strength matters.
There are 4 major rating agencies; Moody’s, Fitch, Standard & Poor’s and AM Best. AM Best is geared towards life insurance companies. Without getting too in depth, the ratings classes (AM Best) are similar to the letter grade system we grew up with, A++ to F. A++ and A+ being “superior” to A and A- being “excellent” and B++/B+ being “good”. The rest go from “fair” to “in liquidation” (there is also an S = suspended). Choose the best company at the fairest price to insure your life and protect your loved ones. That way, when you go, you’ll know that your family will get the benefit and not have a drawn out process to do so.
It is wise to educate yourself on the credit worthiness of the company(ies) you will choose to either insure your life to protect the ones you love or insure the lives of those you love to protect yourself. This is your opportunity to flip the script. Credit check your potential insurer, don’t just price shop. Make sure you find a life insurance carrier that you know will be there for you and your family when you need them most.
About the author: Anthony Veloso has been in the life insurance business for over 2 years. He enjoys coaching football, playing outside with his dog, and taking day trips with his wife and newly born daughter. Anthony is a strong supporter of Orphanages and Battered Woman’s shelters. He would love to put his experience to work for your family to ensure that you have the right life insurance policy. You can contact Anthony at 1-800-654-1953 or AVeloso@Pivot.com.