Life insurance ratings methodology
How we rate the life insurance providers we review.
The US has the largest life insurance market in the world, with 781 companies vying for your business. And while life insurance is a fairly simple concept — you pay a premium to protect your family — the process of choosing a provider can be overwhelming.
Insurers aren’t always transparent about their policy options, features, riders, exclusions and coverage amounts. That’s where our ratings come in.
Backed by industry experience and knowledge, our insurance experts analyze life insurance companies from an objective point of view. We assess their policy lineups, financial stability, riders and reputations, and assign each insurer a rating to reflect that.
Of course, it always pays to do your own research on insurers. But our ratings are here to help you narrow down your list of providers and find the insurer that best fits your family’s needs.
We rate life insurance providers using a system of one to five stars.
★★★★★ — Excellent
★★★★★ — Good
★★★★★ — Average
★★★★★ — Subpar
★★★★★ — Poor
How we rate financial strength
An insurer’s financial strength is important, because your beneficiaries may not file a claim for years — or even decades — to come. It points to the company’s ability to pay out claims in the foreseeable future.
To determine each insurer’s financial stability, we turn to the major financial ratings agency: AM Best. The agency scores insurers on a scale of A++ (Superior) to D (Poor).
How we rate customer satisfaction
A life insurance policy is in force for years or even your whole life, and so you want to make sure your provider is responsive to questions, complaints and — when the time comes — claims.
To assess how life insurance companies treat their customers, we weigh two consumer sources: J.D. Power and the Better Business Bureau.
Each year, J.D. Power studies a sample of 23 providers as part of its Life Insurance Study. It measures customer satisfaction, and considers policy offerings, price, billing and interaction.
It then scores insurers on a 1,000-point scale, awarding them a J.D. Power Circle Rating of 1 to 5 circles.
Insurers that earn 4 or 5 circles scored the highest possible marks in those key categories. As a result, we award insurers who score 3 circles or less with a lower rating.
Better Business Bureau
The Better Business Bureau (BBB) assigns insurers a rating based on customer engagement. While insurers can be accredited with the BBB based on a series of internal criteria like years in business and responsiveness to complaints, accreditation isn’t a prerequisite to getting a BBB rating.
The best BBB rating is A+, and the worst is an F. An “NR” next to a company’s name means it hasn’t been rated yet by the BBB.
The BBB also records customer reviews and complaints, as well as government actions filed against the company.
For our methodology, a BBB score lower than B hurts an insurer’s rating.
How we rate complaint ratios
To learn how many complaints have been filed against the insurer, we look to the National Association of Insurance Commissioners (NAIC).
NAIC calculates a “complaint ratio score” for insurance companies. To crunch the numbers, it considers the volume of complaints to state regulators and adjusts it according to market share.
The median score is 1. A score lower than 1 means the company received less than the average number of complaints.
Providers with a score lower than 1 are given higher ratings, while those that surpass the median score earn a lower rating.
How we rate customization
Most insurers allow policyholders to bridge gaps in their coverage with riders. These include common riders like waiver of premium and disability riders, and rarer options such as long-term care or estate planning riders.
The average number of riders offered by insurers is 5, though we’ve discovered insurers that offer as many as 13.
To find the most customizable policy, lean toward insurers offering a wider variety of riders. In our methodology, companies offering more than 5 riders receive a rating of 4 or higher.
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