When it comes to insurance, and in particular life insurance, we typically seek coverage over a long term. This means we need some assurance that the insurer is going to be around long enough to make good on any claims we or our beneficiaries may have. Here are some tips for identifying the better providers:
- Look for companies that have been in business for a long time. Fifty to a hundred years is a long time
- Be aware that mutual companies have an allegiance to their policyholders, who are also the owners of the mutual company, while stock companies have an allegiance to their stockholders, who more than likely are not the same people as the policyholders. This doesn’t mean you must avoid insurance products offered by stock companies, but if you’re indifferent between two insurers, it may be advisable to go with the mutual company, if that choice exists
- Look for insurance companies with high ratings. Ratings are provided by firms such as A.M. Best, Standard & Poor’s, Moody’s Investors’ Service, and Fitch Ratings. Each rating agency publishes its rating scale. You can find these scales online. Avoid companies with ratings below “A”
Many insurers describe their benefits, or a subset of their benefits as “guaranteed.” This does not mean benefits are risk-free. It means they are promised—as long as the insurance company is healthy. If the company collapses, the guarantees may be invalidated; all the more reason to identify a company with solid long-term prospects.
What is an A-rated Insurance company?
AM Best Rating Services
Fitch Ratings - Insurance