What’s the best way to determine the financial strength of a life insurance company?
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Asked September 4, 2015
When you buy insurance, the financial strength of the company can have far-reaching implications. If you buy from a company which has a poor financial rating, for example, you may be taking a risk on the company going out of business and leaving you with a worthless document for insurance.
One of the best indicators for an insurance company's financial strength is the rating provided by the A.M. Best Company. From that website, you can check the financial rating of dozens of insurance providers, whether they operate nationally or are limited to a single state. The website will also provide you with important information about an insurer, such as who the parent company is and where the insurer is domiciled.
A.M. Best uses a simple grading scale to indicate the current financial status of a company, the top rating is A++, and it is generally a good idea to restrict your insurance dealing to companies with an A or higher rating. Companies that are currently under review may be listed as U rather than having a current grade rating.
The long term financial strength of a company is rated in much the same way, using the same rating scale. This rating indicates how the insurance company is expected to perform over the next 6 months or longer. For long term insurance policies such as home, health or life insurance, the long term rating is more important than the current rating, but it is a good idea to confine your business to only top rated companies in both categories.
Many websites helpfully provide an A.M. Best rating for companies they supply. The problem is insurance ratings change fairly often, and you have no way of knowing how old the information is when you receive it from a third party. Even if the company is being presented as the top rated company in the world, take a few minutes to check them out yourself before investing your money into a policy.
Answered September 8, 2015 by Anonymous