Life insurance ratings are the most important thing to look out for before buying a life insurance policy. It helps you to determine the financial strength of the insurance company. The ratings are important, because they can reassure you that you’ll get paid if you ever file a claim.

Life insurance ratings are denoted by letter grades, much like the grades given in schools like A+, A, B+, B, etc. These ratings are given by various large rating services, like A.M. Best or Standard and Poor’s, that analyzes life insurance companies’ financial strength. There are a few things, in a company, on which they do comprehensive and quantitative research before giving the ratings.

Important things insurance rating services research on

• The insurance companies’ balance sheets.

• The insurance companies’ operating performance.

• The insurance companies’ business profile.

Each of these rating services uses a slightly different methodology to evaluate the life insurance companies. Try to go through the ratings of more than one rating services before deciding on the life insurance company.

Let’s now find out how a few top insurance rating services rate the life insurance companies:

1. A.M. Best:

A.M Best financial ratings are the oldest among all life insurance ratings services. It’s an independent opinion based on the extensive research on the insurance company’s balance sheet, operating performance and business profile. The top four ratings are A++, A+ (superior), A, A- (excellent)

2. Standard and Poor’s:

Standard and Poor’s gives ratings depending on the company’s management team, competitive position and ability to manage risk. Surrender penalties, account deductibles or timeliness of payments are not taken into account in this rating opinion. The top four ratings are AAA (extremely strong), AA (very strong), A (strong) and BBB (good).

3. Fitch:

Fitch ratings use a number of ways to determine the financial strength of an insurance company like management reports, financial statements and company projections. Fitch rating’s doesn’t address the quality of claims handling services. The top four ratings are AAA (superior), AA+, AA and AA- (excellent)

4. Moody’s:

Moody’s rating services use factors like market position, asset quality, focus on product and profitability to determine their life insurance ratings. Their top four ratings are Aaa (superior), Aa (excellent), A (good), Baa (adequate higher risk than a good rating).

Life insurance ratings from the above-mentioned rating services will help you to make a comparison between the various life insurance companies in the market today. There are a few things to keep in mind while checking out the company’s ratings.

Things to remember while checking the insurance ratings

• Look out for ‘A’ ratings: Life insurance companies will get different ratings from different rating services. So, don’t ignore a company which has an ‘A’ from one rating service and a ‘B’ from another. Try considering those insurance companies which hover around ratings of A to B.

• Insurance companies pay for their ratings: Remember that insurance companies pay to the rating services to be rated by them. So, if an insurance company is not there in one of the ratings, it means that the company has not paid to be rated by that rating services.

Looking at the life insurance ratings of each rating services can help you to have a clear idea of how strong and stable the insurance companies are. This will help you to decide from which insurance company you can buy the coverage without any risk.

Related Resources :

Critical Illness Insurance – Provides critical illness insurance cover to people looking to safe guard themselves against serious illness.

Life Insurance Cover – Get low cost protection from the leading life insurance, critical illness insurance and income protection insurance brokers online.