Dear Rachel,

I guess you came across some insurance premiums that look too good to be true.  I’m glad you’re asking yourself , “Why are these rates so cheap?”

The bottom line is that any insurance policy is only as good as the company you buy it from. If the fails your beneficiaries will not collect any money.  So your insurer’s financial strength is crucial.

Economic events over the past several years has hammered home the reality that well known, previously well respected companies can and do fail  Use a little common sense now and you can save your loved ones a lot of grief.

So, before you buy your life insurance policy there should be no doubt in your mind that the company you buy it from will be there to service it and pay your claim when you die.

In order to help you find the strongest and best companies there are a number of agencies that rate life insurance companies.  These insurance ratings companies are paid to have their independent analysts review a company’s financial strength.  They base their ratings on how financially sound the insurance company is based primarily on the quality of its investments and its overall fiscal fitness.

These independent ratings assess the insurer’s ability to pay its claims in a timely manner while meeting its financial obligations.  The five major insurance rating agencies are:  A.M. Best, Fitch, Moody’s, Standard and Poor’s, and Weiss Ratings.

Although the agencies vary a bit in their criteria, if you compare the ratings from the various agencies you will get a pretty good feel about the insurance company’s financial strength.  Of course you will want to buy your policy only from one of the strongest companies.

Here are the highest ratings these companies offer:

A.M. Best: A++ (Secure / Superior)
Fitch: AAA (Secure / Highest)
Moody’s: Aaa (Exceptional)
Standard & Poor’s: AAA (Extremely Strong)
Weiss Ratings, Inc.: A+

Before you buy your life insurance policy you can easily check the financial strength of the insurance companies you are considering online.   A simple search will give you the information you need to make an informed decision.

To put things into perspective, according to A.M. Best, the top rated insurance companies of 2009 are:

Geico: A++ (stable outlook)
Mass Mutual: A++ (stable outlook)
New York Life: A++ (stable outlook)
State Farm: A++ (stable outlook)

In addition, Stable A+ companies include Jackson National, John Hancock, Metlife, and Mutual of Omaha.

Hope this answered your question.
Mike

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