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Choosing a life insurance company

Life insurance company ratings: Why they matter

When shopping for life insurance, look at a company’s financial strength from multiple rating agencies to assess their ability to pay future claims.
With so many insurance companies offering similar traditional types of term and permanent* life insurance policies, it's no wonder many Americans are comparing rates to find the very best policy for their money. According to LIMRA, 81% of those who do not have life insurance say the reason is that it's too expensive.

However, shopping for life insurance based on rates shouldn't be the only deciding factor. With such an important coverage, you also need to consider the type of company you're buying from. This includes looking at their financial strength rating (FSR).

What's an insurance company rating?

Life insurance company ratings are essentially the opinion of an independent agency regarding the financial health of the insurance company it rates. A.M. Best, Fitch, and Moody's are three independent agencies that rate the financial strength of insurance companies. While these reports can be very insightful as to the insurance company's credit rating, they are considered an opinion, and ratings of the same insurance company can differ among rating agencies.

It's important to note that each agency has its own proprietary rating scale and rating standards, as well as its own population of rated companies. And although each service uses an alphabetical rating scale, an A+ from one agency may not mean the same as an A+ from another.

For example, let's take a look at A.M. Best. This popular online service allows you instant access to an insurer's financial rating and, consequently, their ability to meet financial obligations to its policyholders. Their particular rating process involves reviews of a company's balance sheet, operating performance and business profile, including comparisons to industry standards. It includes six ratings:
  • A++, A+ (Superior)
  • A, A- (Excellent)
  • B++, B+ (Good)
In addition, A.M. Best includes ten ratings for companies deemed vulnerable:
  • B, B- (Fair)
  • C++, C+ (Marginal)
  • C, C- (Weak)
  • D (Poor)
  • E (Under Regulatory Supervision)
  • F (In Liquidation)
  • S (Rating Suspended)
It's a good rule of thumb to consider a company's rating from two or more agencies before deciding to buy or keep a policy from that company. Moreover, agencies can announce rate changes at any time, so it's best to check annually on the ratings of any company that you might be interested in.

Why are financial ratings important?

An insurance company's credit rating indicates its ability to pay policyholders' claims. Imagine paying your life insurance premiums for years and when your family needs it the most, the insurer isn't able to keep its promise. As a consumer, you have the right to know the financial stability of the life insurance company that you're placing your trust in.

How to get a financial rating?

To get rating information, visit the rating services' websites or call their customer service departments. Most rating services provide free rating information to consumers, although you may have to pay if you need several ratings. You can also ask your insurance agent or broker for rating information.


*As long as required premium payments are timely made.

Note: An insurer may have paid a fee to the rating agency.

1. LIMRA 2021 Insurance Barometer Study, 2021.



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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

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