Life Insurance Company Ratings

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Tim is a licensed life insurance agent with 23 years of experience helping people protect their families and businesses with term life insurance. He writes and creates stuff for QuickQuote and other insurance and financial websites. You can find him on Twitter.

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UPDATED: Sep 6, 2020

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Term Life Insurance Company Ratings: Why They Matter

When considering the purchase of a life insurance policy, we recommend examining the financial ratings of the life insurance company to be sure the company you choose is financially sound. While the ratings can be quite detailed, you don’t need a degree in finance to make a reasonable decision while comparing term life insurance quotes. Learning these basics will help you understand the significance of the ratings used to assess the financial strength and stability of life insurance companies.

Credit Rating Agencies

A.M. Best and Standard and Poor’s (S&P) are independent financial and credit rating agencies that provide in-depth analysis of a life insurance company’s (or other entity) qualitative and quantitative financial strength. They offer opinions on the ability of the life insurance company to meet its financial obligations. Here are some examples of the information reviewed by credit rating agencies:

  • Operating performance and plans
  • Balance sheet strength
  • Business profile
  • Debt securities
  • Business management and philosophy
  • Comparison to competitors and industry standards
  • Likelihood of default
  • Assessment of historical data
  • Anticipation of possible future impacts

A.M. Best ratings are based on a scale from ‘A++’ down to an ‘F’ rating. An ‘A++’ rated life insurance company is one that has a superior ability to meet its ongoing obligations to policyholders. An ‘F’ rated company is typically a company that has failed and is in liquidation.

S&P ratings range from ‘AAA’ at the high end to ‘D’ at the low end. S&P considers an ‘AAA’ rated life insurance company to have an extremely strong capacity to meet its financial commitments and obligations. Whereas a ‘D’ rating means the company is in default or bankruptcy.

Other well-known rating agencies are Moody’s Ratings, Fitch Ratings, and Weiss Ratings.

Credit rating agencies are an important source for determining the strength and stability of a company. However, they are not the only source. We don’t recommend you make important decisions about the purchase of a term life insurance policy solely by the company’s financial and credit ratings. On the other hand, it’s probably not a good idea to do business with a poorly-rated life insurance company.

When considering the ratings of these companies, keep in mind the difference between an ‘A++’ rated company and an ‘A+’ company is probably not going to matter much in the long run. It’s a little like splitting hairs at that point. If the ‘A++’ company is going to cost you significantly more in premium, you are better off choosing the ‘A+’ company and pocketing the savings.

If you are too busy to research life insurance company ratings (and who isn’t?), you can find the A.M. Best and S&P ratings of the companies we offer right alongside your quote. And to keep things simple, we only offer top-rated life insurance companies – ‘A’ rated or better!

How important do you consider life insurance company ratings to be? Will they impact your decision?

Numbers. Letters. Plusses & minuses. Let’s clean up this mess.

Independent financial and credit rating agencies, such as AM Best and Standard & Poor’s (S & P), provide in-depth analysis of a life insurance company’s financial strength. They issue opinions on the life insurance company’s ability to meet financial obligations such as paying death claims.

We display the company ratings for each company along with our quotes. We recommend you consider these ratings as one of the many important factors when choosing a life insurance company.

These tables show how each company’s rating categories are set up, with A++ being the highest for A.M. Best and AAA being the highest for S & P. Click on any rating category to see its definition.

A.M. Best Ratings

All A.M. Best ratings are opinions of A.M. Best of an insurer’s financial strength and ability to meet ongoing obligations to policyholders.

See www.ambest.com for the most current rating information.

A++ (Superior 1st highest of 15)

Assigned to companies that have, in A.M. Best’s opinion, a superior ability to meet their ongoing obligations to policyholders.

A+ (Superior 2nd highest of 15)

Assigned to companies that have, in A.M. Best’s opinion, a superior ability to meet their ongoing obligations to policyholders.

A (Excellent 3rd highest of 15)

Assigned to companies that have, in A.M. Best’s opinion, an excellent ability to meet their ongoing obligations to policyholders.

A- (Excellent 4th highest of 15)

Assigned to companies that have, in A.M. Best’s opinion, an excellent ability to meet their ongoing obligations to policyholders.

B++ (Very Good 5th highest of 15)

Assigned to companies that have, in A.M. Best’s opinion, a good ability to meet their ongoing obligations to policyholders.

B+ (Very Good 6th highest of 15)

Assigned to companies that have, in A.M. Best’s opinion, a good ability to meet their ongoing obligations to policyholders.

B (Fair 7th highest of 15)

Assigned to companies that have, in A.M. Best’s opinion, a fair ability to meet their current obligations to policyholders, but are financially vulnerable to adverse changes in underwriting and economic conditions.

B- (Fair 8th highest of 15)

Assigned to companies that have, in A.M. Best’s opinion, a fair ability to meet their current obligations to policyholders, but are financially vulnerable to adverse changes in underwriting and economic conditions.

C++ (Marginal 9th highest of 15)

Assigned to companies that have, in A.M. Best’s opinion, a marginal ability to meet their current obligations to policyholders, but are financially vulnerable to adverse changes in underwriting and economic conditions.

C+ (Marginal 10th highest of 15)

Assigned to companies that have, in A.M. Best’s opinion, a marginal ability to meet their current obligations to policyholders, but are financially vulnerable to adverse changes in underwriting and economic conditions.

C (Weak 11th highest of 15)

Assigned to companies that have, in A.M. Best’s opinion, a weak ability to meet their current obligations to policyholders, but are financially very vulnerable to adverse changes in underwriting and economic conditions.

C- (Weak 12th highest of 15)

Assigned to companies that have, in A.M. Best’s opinion, a weak ability to meet their current obligations to policyholders, but are financially very vulnerable to adverse changes in underwriting and economic conditions.

D (Poor 13th highest of 15)

Assigned to companies that have, in A.M. Best’s opinion, a poor ability to meet their current obligations to policyholders, but are financially extremely vulnerable to adverse changes in underwriting and economic conditions.

E (Under Regulatory Supervision 14th highest of 15)

Assigned to companies (and possibly their subsidiaries/affiliates) that have been placed by an insurance regulatory authority under a significant form of supervision, control or restraint whereby they are no longer allowed to conduct normal ongoing insurance operations. This would include conservatorship or rehabilitation but does not include liquidation. It may also be assigned to companies issued cease and desist orders by regulators outside their home state or country.

F (In Liquidation 15th highest of 15)

Assigned to companies that have been placed under an order of liquidation by a court of law or whose owners have voluntarily agreed to liquidate the company. Note: Companies that voluntarily liquidate or dissolve their charters are generally not insolvent.

S (Suspended)

Assigned to companies that have experienced sudden and significant events affecting their balance sheet strength or operating performance whereby the rating implications cannot be evaluated due to a lack of timely or adequate information.

NR (Not Rated)

Assigned to companies reported on by A.M. Best, but not assigned a Best’s Rating.

S & P Ratings

A Standard & Poor’s issue credit rating is a current opinion of the creditworthiness of an obligor on a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). The issue credit rating is not a recommendation to purchase, sell, or hold a financial obligation since it does not comment as to market price or suitability for a particular investor.

See www.standardandpoor.com for the most current rating information.

AAA

An obligation rated ‘AAA’ has the highest rating assigned by Standard & Poor’s. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.

AA

An obligation rated ‘AA’ differs from the highest-rated obligations only in small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong.

A

An obligation rated ‘A’ is somewhat more susceptible to the adverse changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong.

BBB

An obligation rated ‘BBB’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

Obligations rated ‘BB’, ‘B’, ‘CCC’, ‘CC’ and ‘C’ (below) are regarded as having significant speculative characteristics. ‘BB’ indicates the least degree of speculation and ‘C’ the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.

BB

An obligation rated ‘BB’ is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.

B

An obligation rated ‘B’ is more vulnerable to nonpayment than obligations rated ‘BB,’ but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation.

CCC

An obligation rated ‘CCC’ is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

CC

An obligation rated ‘CC’ is currently highly vulnerable to nonpayment.

C

A subordinate debt or preferred stock obligation rated ‘C’ is CURRENTLY HIGHLY VULNERABLE to nonpayment. The ‘C’ rating may be used to cover a situation where a bankruptcy petition has been filed or similar action was taken, but payments on this obligation are being continued. A ‘C’ also will be assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is currently paying.

D

An obligation rated ‘D’ is in payment default. The ‘D’ rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired unless Standard & Poor’s believes that such payments will be made during such a grace period. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

NR

This indicates no rating has been requested, that there is insufficient information on which to base a rating, or that Standard & Poor’s does not rate a particular obligation as a matter of policy.

All ratings ‘AAA’ to ‘D’ can be modified with the plus (+) or minus (-) modifier.

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