Selecting the right insurance company is an important financial decision. The financial strength of your insurer is crucial. If the company cannot pay future claims or benefits, other considerations become unimportant.
Financial strength ratings represent an analysis of a wide variety of risks that could affect an insurer's long-term survival. Insurance companies can fail due to inadequate financial capabilities, competitive forces or changing fundamentals in their marketplaces.
When looking for a companies financial strength, there are 4 main rating companies:
- A.M. Best
- Standard & Poor’s
- Moody’s
- Fitch
They all use slightly different rating systems. S&P and Fitch are the most closely related both using a similar scale (AAA, AA, A, BBB, BB, B, etc). They both use + and – as modifiers within their scale as well. Moody’s on the other hand uses a fairly similar scale (Aaa, Aa, A, Baa, Ba, B, etc) but their modifiers are numeric with 1 being on the high end to 3 being on the low end. AM Best focuses a bit more on the + and – with their scale (A++, A+, A, A-, B++, B+, B, B-, etc). To access most of the sites and usually their rating scales or definitions you will need to sign up.
Although the above companies would be good reference sites, I would suggest that the best place to obtain information on an insurer’s financial strength, is that particular insurer’s website and usually their rating scales or definitions you will need to sign up.
Although the above companies would be good reference sites, I would suggest that the best place to obtain information on an insurer’s financial strength, is that particular insurer’s website.