Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.
Financial strength ratings for life insurance
Learn how to decode the ratings assigned to insurers.
As a policyholder, you count on your life insurance company to pay out a claim at any time. That’s where financial ratings come into play. Independent agencies investigate insurers’ ability to pay claims — but ratings differ among companies.
What are financial strength ratings?
Financial strength ratings point to a life insurance company’s ability to meet its financial obligations — like paying claims.
In the US, four major ratings agencies assess insurers’ financial stability:
- A.M. Best
- Standard & Poor’s
Ratings are based on the insurer’s financial holdings and how much money it’s collecting in premiums versus paying out in claims.
Do insurers have to pay to get a rating?
A.M. Best and Fitch require insurers to pay for registration — and therefore, a rating — while Moody’s and Standard & Poor’s offer free registration.
When you’re comparing providers, be aware that companies highlight the higher ratings they receive — and ignore the lower ones. You can run your own search on each agency’s site
Why financial strength matters
Financial strength ratings confirm that your insurance company has the cash reserves to pay out claims. If you come across an insurer with a low rating, that means there’s a chance they won’t be able to pay future claims — or they’re at risk of going under.
When you buy life insurance, you’re investing in your family’s financial future. You don’t know when your beneficiaries will file a claim. Whether you die in five years or thirty years, you need to make sure your insurance company can pay out the full death benefit to your loved ones.
How to interpret financial strength ratings
Each ratings agency uses its own grading scale, rating labels and unique criteria to evaluate insurers. As a result, it’s common to see different ratings for the same company. For example, an A+ is the second-highest rating from A.M. Best and the fifth-highest for Fitch and S&P.
This is the spectrum of ratings issued by each agency from highest to lowest. Note that labels and descriptions reflect that agency’s internal ratings.
|Agency||Ratings from best to worst|
|Standard & Poor|
Compare life insurance providers
When you’re researching life insurance companies, take financial ratings into account. These ratings reveal a company’s financial footing and whether they’re likely to pay out claims in the future. If you’re looking at highly-rated insurers, you can be confident that your loved ones will see the money you left them.
Financial ratings aren’t the only factor to consider when choosing an insurer. When weighing your options, compare life insurance providers and their ratings against your budget and long-term goals to get the strongest policy and premium.
More guides on Finder
Texas disaster assistance for the 2021 Winter Storm
Here’s where to get financial help for yourself and your business if you’ve been affected by the storm in February 2021.
Lemonade life insurance review
This fintech just branched out into low-cost life insurance — but its lineup is limited.
Combined life insurance review February 2021
Find unusually low face values for a whole life policy, ideal for supplemental insurance.
Vitagene COVID-19 test kit review
With a 99% accuracy rate, this at-home test is one of the most reliable on the market.
How to get life insurance after a DUI or driving offense
A poor driving record may result in higher rates on your life insurance, with some insurers turning you away altogether.
How to prepare for divorce: 9 attorneys share their advice
From gathering your financial documents to finding a good therapist, we asked the experts for their No. 1 tip for divorcing spouses.
Drivers aren’t seeing 100% of insurance savings while claims are down — Are more serious accidents to blame?
Preliminary data on fatal accidents and driving behavior could explain why drivers haven’t seen higher insurance refunds.
Electric vehicles in 2021: How new models, insurance rates and tax breaks affect their cost to own
See average EV insurance rates for 2021 based on Finder’s car model research, plus new models on the horizon.
Permanent life insurance policyholders can now funnel more money into cash value
A new change to the tax code quietly went into effect on January 1, lowering the minimum interest rate for permanent life insurance policies.
Compare tuition insurance
If your child gets sick or injured and has to take time away from college, tuition insurance can reimburse you for what you already paid.
Ask an Expert