Many people shop for life insurance based on the amount of coverage they want and the cost of the monthly premium they will pay. But an important element to consider when shopping around is the financial strength ratings of a life insurance company. After all, life insurance coverage is a legal contract between you and the insurance company. You want to be sure that the company you’re entrusting to protect your family is financially strong and will be around to pay the full value of your coverage to your beneficiary when you’re gone.
Rating agencies – why should I trust these sources?
Insurance companies are rated by independent agencies, which assess and report on the current financial strength and stability of the company. When you’re shopping for life insurance, it’s important to gather research from third party, impartial sources to ensure you are confident the company you may receive coverage from is credible and trustworthy.
Four prominent agencies are Standard & Poor’s, Moody’s, A.M. Best and Fitch. Each of these organizations uses a different formula to determine how well an insurance company can meet its obligations to policyholders. Yet each rating agency has its own assessment process and system for reporting ratings.
Be sure to take the time to familiarize yourself with the rating criteria and scoring models for each agency.
Top Life Insurance Ratings from the Leading Independent Agencies
How do rating agencies determine grades?
Ratings agencies consider a range of factors when determining a company’s financial strength and stability and issuing a grade – from a company’s profitability to their access to funds for paying claims based on successful investments: including loans, bonds and asset-backed securities.
If life insurance financial strength ratings are very low, there is a higher risk that the company may not be in business in years to come. In other words, a lower rated company may have a harder time meeting its ongoing financial obligations than a highly rated company.
Keep in mind, an insurance company’s rating provides important insight into understanding a company’s financial strength. An insurance company’s financial health is a complex and constantly evolving story – and doing your research through independent rating agencies is a smart first step to finding a company you can trust for the long term.
Once you’re ready to make a decision about life insurance coverage with a company you can trust, go online to find out more about the products they offer, and in many cases, get a personalized rate quote. If you have additional questions, call to speak with a representative that can help you find the insurance coverage that can give you added peace of mind.
This article is provided by New York Life Insurance Company for informational purposes only. This article is not intended to provide tax, legal, financial or accounting advice. Please consult your own professional for advice specific to your circumstances.