How do I Decide What Life Insurance Company to Buy From? (Part 1 - Ratings)

Just buy your life insurance from Garden State Life Insurance of course. End of article.

Just kidding.

I realize this is a weird article coming from a blog sponsored by a life insurance company, but try and hear me out. My next series of articles has a few points to consider when reviewing your options whether you are interested in buying insurance from Garden State Life or not.

Ratings

One thing you definitely want to know about a company before you buy from them is their ratings. Every life insurance company is reviewed on a regular basis by multiple ratings agencies. Their job is to look at the financial strength of the companies and give investors an idea as to whether it would be wise to conduct business with a particular company. This is especially important for one considering the purchase of life insurance, as you may need the company to pay benefits well into the future. You definitely want to know that they are going to be there when you need them. Also, if your life insurance company goes out of business and your health has deteriorated, then you may have to pay a substantially higher premium or may not qualify for life insurance at all. This becomes even more important if you have any type of product with cash value. Unlike banks that have FDIC insured balances, the U.S. government does not guarantee insurance company deposits.

An example of a common ratings agency used for insurance companies is A.M. Best. A.M. Best ratings are similar to the letter grades that you get in school. They go from A++ to F (for more details see http://www.ambest.com/ratings/guide.asp). I would advise that you purchase with a company that has an “A-“ rating or higher. This does not guarantee that the life insurance company will not become insolvent, as even an “A++” company can deteriorate over time, but your life insurance premiums should be about as safe as they can get.

Most life insurance companies with an “A” in their A.M. Best rating publish the rating on their sales materials and use it as a selling feature so you probably will not have to go through too much effort to find the rating of a highly rated company. If the A.M. Best rating does not appear in the sales material, you should be able to get the rating off of the insurance company’s website or from the agent or quote service trying to sell you the policy. You can also look the life insurance company up directly on A.M. Best's website to find their current rating.