Ratings of Life Insurance Companies

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Credit rating companies exist to cover credit ratings from practically every type of business, including life insurance companies. Companies that offer life insurance policies are like any other business - if they are well-managed they will flourish; if they are poorly managed they can go bankrupt - and your money paid into them as premiums is lost. It is important to consider the life expectancy of your life insurance company when you buy insurance.

What Ratings Provide

The rating companies judge each insurance company's:

• liquidity
• operating performance
• financial flexibility
• capital strength
• management quality
• competitive positioning
• long-term business viability

They then rank the companies according to how they score on each of these factors. Weiss Ratings, for example, rates gives insurers a rating from A (Excellent) to E (Very Weak).

What Ratings Don't Provide

These ratings don't assess management's willingness to honor each company's obligations - just their ability to do so. The ratings also do not address the quality of an insurer's claims handling and customer service.

Leading Life Insurance Rating Companies

The largest rating companies include:

• AM Best only rates insurance companies. Their ratings are free.
• Moody Investor Services
• Standard & Poors has rated insurance companies across a number of industries since 1971.
• Weiss Ratings charges for their ratings.