When you’re shopping for life insurance, you’ll probably notice that every life insurance company has a rating. These aren’t customer reviews, like on Yelp or Google or Uber. Instead, they’re ratings of the company’s financial health, as decided by third parties like A.M. Best.
Looking at these ratings, you might think that top rated life insurance companies are higher quality companies, therefore they charge higher rates. You’d be right about the quality, but not about them being more expensive.
"I haven't found any information that states that A rated companies are inherently more expensive," says Brian Grimes, CFP®, a senior client services manager here at PolicyGenius. But A rated companies are in better financial health, which means they’re more likely to be around in thirty years.
This is super important for a lot of reasons, but the main one is that you want the company who issued your life insurance policy to be in business for the entire length of your policy.
"You don’t know what’s going to happen over the next thirty years," says Tyler End, CFP®, Product Manager and resident disability insurance expert at PolicyGenius. "You want the benefit to be there if you need it."
Lower rated companies have a slightly higher risk of going out of business, and while that doesn’t mean your life insurance policy will completely disappear (many insurance companies are reinsured by other companies), it does make things a lot more complicated for you. Scratch that — it makes things more complicated for your beneficiaries if you die and they need to collect on the policy.
If you’re doing research on your insurance company and want to know what the experts think about its financial health, you have a few resources:
Standard & Poor’s
Unfortunately, these companies don’t all use the same ratings systems, so it can be hard to compare their ratings with each other. For example, an A+ at A.M. Best doesn’t necessarily match up with an A+ at Fitch Ratings — the way Fitch Ratings looks at life insurance could be more or less strict.
To help you out, we broke down how A.M. Best rates life insurance companies in this post from last year. In short: go through your chosen reviewer’s website and read up on how they make their decisions.
If you want a comprehensive look at the top rated insurance companies, check out our life insurance company reviews. We not only look at the financial health of the company, but also the Better Business Bureau rating and the J.D. Power and Associates score. Additionally, we take a deep dive on the actual life insurance product that each company sells. We tell you whether or not their rates are good for a particular health condition and what kind of riders are available. We also tell you what it’s like to apply for their policy and what it’s like after you’re a policyholder.
Image: Samson Duborg-Rankin