Cheap Life Insurance? Check Life Insurance Company’s Financial Rating

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Home Page > Finance > Insurance > Cheap Life Insurance? Check Life Insurance Company’s Financial Rating

Cheap Life Insurance? Check Life Insurance Company’s Financial Rating

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Posted: Feb 28, 2011 |Comments: 0
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How important is the rating of a life insurance company? The recent financial crisis has shown just how vital it is to ascertain a life insurance company’s rating before purchasing a policy. Some companies have not survived the economic onslaught, but many remain strong. You need to find a life insurance company that has an excellent rating that shows robust financial strength/integrity to honor the terms and conditions of your life policy.

Some of the best financial ratings institutions are A.M. Best, Moody’s, Standard & Poor’s, and Fitch. These institutions regularly analyze the risks that could affect a company’s financial strength and its prospects for long-term survival. The ratings are the result of rigorous qualitative and quantitative financial analyses of a company, the volume of business they conduct and their performance in executing death benefits. These institutions may change their methodologies to reflect changes in the insurance market related to inflation, healthcare costs, etc.

A high rating does not guarantee a company’s financial stability, but it does provide prospective customers with a measurement to compare financial strengths and operating ability of various companies. It is therefore, important, that you check a life insurance company ratings before you purchase the policy. If you are already a policyholder, check your life insurance company to make sure it still carries a high rating. If not, you may want to consider switching to another life insurance carrier.

Smaller life insurance companies are more prone to being affected by market changes. Due to their limited resources, they may not be able to adapt as quickly to market changes and suffer financial setbacks. Larger companies are better able to withstand the political and economic upheavals that affect the market.

Different insurance rating institutions use different grading systems. Here are the types of ratings you should be looking out for:

A.M Best Life Insurance Ratings

A.M Best is a global full-service credit rating agency which was established in 1906. It is dedicated to serving the insurance industry. A secure financial strength rating is represented as:

A++, A+ Superior
A, A- Excellent
B++, B+ Good

Any rating lower than this denotes that the life insurance company may be in a vulnerable position.

Standard and Poor’s (S&P)

This company has 23 global offices and dates back 150 years. The criteria used for analysis of a company’s rating include quantitative and qualitative elements, analytical methodologies and assumptions.

The general meanings of their top ratings are expressed below. Modifiers such as +/- are used to denote relative standing within the major rating categories.

AAA Extremely strong capacity to meet financial commitments. Highest Rating.
AA Very strong capacity to meet financial commitments.
A Strong capacity to meet financial commitments, but somewhat susceptible to adverse economic
conditions and changes in circumstances.
BBB Adequate capacity to meet financial commitments, but more subject to adverse economic conditions.
BBB- Considered lowest investment grade by market participants.
BB+ Considered highest speculative grade by market participants.

Fitch Group
Fitch Rating is a global rating agency with 50 worldwide offices with headquarters in New York and London. The institution was established in 1913. The ratings assigned by Fitch for a life insurance company are opinions based on established criteria and methodologies that Fitch continuously evaluates and updates.

Like S&P, Fitch also uses modifiers such as +/- for each category:

AAA the best quality companies, reliable and stable
AA quality companies, a bit higher risk than AAA
A economic situation can affect finance
BBB medium class companies, which are satisfactory at the moment

Moody’s

The systems of grading securities originated with John Moody in 1909 aiming to provide investors with a simple system of gradation to compare creditworthiness of various companies. Moody’s uses nine symbols to designate least credit risk to denoting greatest credit risk with numerical modifiers, 1, 2 and 3, to each generic rating classification:

Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C

Online Life Insurance with Free Ratings

Ratings empower consumers with the knowledge they need to know about the financial status of a company in order for them to help them make an informed decision. An online life insurance provider can provide you with multiple free life insurance quotes that include the current ratings from top life insurance ratings institutions. By choosing a policy from a life insurance carrier that has top ratings, you can be sure you are placing your trust in a financially solid company that shows the ability to meet its financial obligations.

Look for BBB-accredited online life insurance providers who are affiliated to the best life insurance carriers. Fill in their online questionnaires and within minutes you will receive free life insurance quotes for comparison. Evaluate each of them carefully to allow you to come to an informed decision.

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About the Author:

About AccuQuote:
AccuQuote is a leader in providing term life quotes to people across the United States. In 1986 it began operating with a single goal: to make the process of buying term life insurance as easy as possible for its customers. Their experienced professionals consistently deliver the most affordable term life insurance rates by comparing thousands of life insurance policies from dozens of top-rated carriers.

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