Life Insurance Company Ratings

How to Measure a Life Insurance Company's Ability to Pay Claims

When choosing a life insurance company one of your primary considerations should be their ability to pay benefits and settle claims. The life insurance company with the cheapest price is not necessarily the best choice. The simplest way to verify an insurance company's financial solidity is to check the life insurance company's financial strength ratings.

3 Steps to Review a Life Insurance Company's Financial Strength:

1. Check for yourself. Don't rely only on what the life insurance company says. Companies are likely to highlight a higher rating from one agency and ignore a lower one from another agency, or to select the most favorable comments from a rating agency's report. Consider checking a company's rating for this year and the previous year from 2 or more agencies before buying or keeping a policy. Agencies announce changes of ratings at any time so we recommend an annual or more frequent check up on ratings of your insurance company. A number of highly respected independent organizations rate financial strength of insurance companies. Among these are: A.M. Best, Fitch, Moody's Investor Services, Standard & Poor's and Weiss Ratings, Inc.
2. Know the differences in rating codes. An A+ from A.M. Best is the next-to-top rating of its 15 categories, but an A+ from Fitch or S&P is their 5th-highest rating (out of 24 categories for Fitch, and out of 19 categories for S&P). Moody's doesn't have an A+ rating.
3. Search by underwriting company, not by brand. AIG markets life insurance in the United States under the marketing name "AIG American General," but several companies underwrite products under that name, including American General Life Insurance Company. Check the company's web site for a complete list of underwriting companies for that brand name.

Each rating firm uses its own evaluation process typically assessing insurance company financial strength, recent performance and stability of management. The rating scales are different. Some might use AAA to indicate strength, while others may use A++ and an A+ at one does not necessarily mean the same thing as AA at another. Read what the agency says they have measured and ratings interpretations.

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