When you are selecting an insurance company, it is important that you are aware of the insurer’s financial strength. Luckily, there are financial rating companies that do the hard work for you. One of these companies is A.M.Â
Depending on the rating, youâll be able to determine which insurance company is best for you.
It should be noted, A.M. Best is not the only rating company. There are several others, like the Fitch rating and Standard and Poors.Â
A.M. Best Ratings AT A GLANCE
Largest credit rating agency in the world specializing in the insurance industry
Oldwick, NJ 08858
A.M. Best Company Information
So, what makes this one rating company special? They arenât the only rating company out there, but they are the most notable and most widely used.
To quote A.M. Best, their rating system â. . . is an independent opinion of an insurerâs financial strength and ability to meet its ongoing insurance policy and contractual obligations. It is based on a comprehensive quantitative and qualitative evaluation of a companyâs balance sheet, strength, operating performance and business profile.â
Aside from giving the companies a letter grade on their scale, the rating company also includes an outlook projection. They give them an outlook of either positive, negative, or stable. While these are just guesses, with A.M. Best they have research and previous information to base their outlooks on.
A.M. Best provides a way for each company to see just where they rank with consumers and helps them know just what they have to do to correct their mistakes.
Finding out what is A.M. Best ratings for insurance companies is the first step towards getting a secure policy for you and your family.
How Does A.M. Best Insurance Ratings Scale Work?
For a professional company, using a basic method of grading insurance companies has proven to be an effective and helpful tactic. Here’s how the A.M. Best Insurance rating scale works:
- A++, A+, A, and A- all identify the top insurance companies. Receiving an A for the company shows how financially strong they are, how capable a company is of guaranteeing your policy and keeping it secure.
- B++, B+, B, and B- ratings rank companies as good for those who canât afford what higher ranked companies offer their services for. With a B ranking, you can depend on the company to provide a secure policy for affordable rates and rely on them to help your family get the help they need once youâre gone. For clientâs knowing that your family has something to fall back on during difficult times is a welcome relief.
- C++ and C+ are the only two scores for the C category, indicating an average insurance company. No bells or whistles attached, just a straightforward policy with straightforward premiums, a great choice for the first time you buy life insurance.
- A âDâ rank is only reserved for companies that fall below A.M. Bestâs minimum standards, an E rank means the company is under state supervision, and an F rank is only for companies going into liquidation. Any rating below a C shows how unreliable the company within the industry.
It’s obviously important to understand the rating scale of the insurance company before buying your life insurance.
A.M. Best Ratings For Insurance Companies
Now you have an understanding of what is A.M. Best ratings and how they work. A visit to the A.M. Best website is the perfect choice when looking for an insurance company. A company’s ranking shows just how dependable they are and if youâre getting all the benefits you should be for what youâll pay in premiums. âWhat is A.M. Best ratingsâ is a question best asked when beginning to search for a policy, a question that can make your search easier and simpler than you originally thought.
Why A.M. Best Matters
Sure, itâs nice to find a company with an A+ rating, but does it matter? How does it impact you or your life insurance policy?
These ratings are a good indicator of how much you can trust your insurance company. If a company doesnât have good financial strength, there is always a chance that the company could go bankrupt and your policy wouldnât be paid out, which is a terrible turn of events.
There is no way to predict the future or what could happen to a company, but rating systems give us more direction that completely guessing. The A.M. Best ratings give you an idea of the past and stability of a company without you having to do the research yourself.
Unless youâre really connected with the insurance industry, you probably donât know which insurance companies have been around the longest or which ones have experienced financial problems in the past.
Because life insurance is such an important purchase, itâs vital that the company that you choose is going to be around for hundreds of years to come. Life insurance gives you and your loved ones the peace of mind and financial coverage that they need in case something tragic were to happen.
How do A.M. Best Ratings Compare?
How does A.M. Best compare to other popular rating companies? A.M. Best is not the only company on the market that rates insurance. A few other popular options are Fitch and Standard and Poors.
Below we compared A.M. Best, Fitch and Standard and Poors. In this table, it is important to note that though the ratings may appear in the same row, it does not mean they are equal to each other. For example, Fitch’s AA rating may differ from Standard and Poors.Â
Ratings of Insurers’ Financial Strength
|A.M. Best||Fitch||Standard and Poors|
|Superior ability to meet ongoing obligations||Exceptionally strong capacity to pay financial commitments||Extremely strong financial security characteristics. Highest S&P rating|
|Companies rated A+ are one “notch” lower than those rated A++||Very strong capacity to pay financial commitments||Very strong financial security characteristics|
|Very strong capacity to meet financial commitments||Strong capacity to pay financial commitment||Strong financial security characteristics|
|Good ability to meet financial obligations||Adequate capacity to pay financial commitments||Good financial security characteristics|
|Fair ability to meet financial commitments||Elevated vulnerability to default risk but has flexibility to service financial commitments||Marginal financial security characteristics|
|Marginal ability to meet their ongoing insurance obligations.||Significant risk of default with limited margin of safety||Weak financial security characteristics|
History of A.M. Best
Alfred Best founded A.M. Best Company in 1899. A.M. Best is one of the oldest and most established rating companies in the world. They were established with the goal of reporting the financial stability of insurance companies. They currently have ratings for companies that are in more than 80 different countries across the world.
When you start looking for a life insurance policy (or any other kind of insurance policy), itâs important that you look at the companyâs A.M. Best rating. While their rating shouldnât be the determining factor in your decision, itâs important to know that youâre buying a policy from a reputable company.
A faulty insurance company shouldnât keep you from getting the coverage that you and your loved ones deserve. Donât be one of the countless stories of a family that suffers the loss of a family member, and then learns that they have thousands of dollars of debt and no way to pay for it.
The post What is A.M. Best Ratings and Why Should You Care? appeared first on Good Financial CentsÂ®.