When you’re ready to buy a new life insurance policy, most first-time buyers are thrown into a fix. There’s enough matter to research that will leave even seasoned bargain shoppers and deal hunters in conundrums, and it doesn’t get better when so many opinions on life insurance are already out there, especially on Internet forums, self-help books and investor websites. No matter if you choose whole life or term life insurance, it’s important to remember to buy from a financially stable life insurance company.
Why people choose poorly rated companies:
Some people may argue for a poor rating citing cheaper rates. There is absolutely no reason to believe this notion—life insurance rates, especially term life, have been at near historic lows because of improved longevity and online selling which keeps rates competitive. If you have had a life insurance policy for many years bought from a poorly rated company, take a comparison tour for free life insurance quotes on an aggregator website today. You’ll be surprised at how life insurance giants that may have had high rates in the past are now offering low rates.
Others may get caught in lucrative schemes that promise no medical exams or decreasing cover for lower premiums despite health complications they may have. Even at your most desperate, talk to a certified agent at an aggregator website to see if there are legitimate alternatives that you are eligible for. Even with high risk occupations or medical conditions, the proper documentation of safety certifications or success of treatment and updated records of mortality can prove to an insurer that you are not nearly as risky as their calculations say you are.
Why is the financial rating of a company important?
Think risk. With economies rising and crashing every day, what is the use of having an insurer that can’t guarantee your own risk if they themselves are in a bad place? The idea of insurance is to hedge against an unlikely bet which may very likely happen to you.
Think long term. Many people choose to buy 20 or 30 year term life insurance policies on themselves. In our ever changing volatile markets, twenty years can seem like an aeon. Even the most stable companies witness changing scenarios that can shock and rankle the most loyal customers. The good news is that responsible companies do everything they can in their power to cause their customers the least amount of discomfort, for the most part. You may not be able to expect the same from a company that has not managed to safeguard its finances or commitments in tough economic times.
What do financial ratings comprise?
This varies based on the ratings agency or organization you refer to. For instance, AM Best looks primarily at the company’s balance sheet strength. It also looks at the company’s operating performance and business profile, and compares it with its own quantitative and qualitative standards.1 When Standard & Poor calculates creditworthiness of a company, it looks primarily at the likelihood of default, and associates a higher rating with the ability to withstand more stressful economic environments as compared to other lower rated insurers.2
Which rating systems are good references?
Here are some names that are usually considered when looking up a carrier’s ratings:
AM Best, Standard & Poor’s, Moody’s, Fitch Ratings, Weiss Ratings, Nationally Recognized Statistical Rating Organization, Reuters, Bloomberg L.P. and Morningstar, Inc.
Due diligence is required even when relying on an agency’s ratings, such as reviewing these ratings through a third party’s opinion, and finding out which model they use to get paid for their services. Some agencies set up checks and balances to ensure that the ratings are objective and reliable, and will clearly outline these safeguards on their website or agency literature. Some agencies sell this information for anywhere between $19 and $80 online. The decision to cough up this money during research is entirely up to you, and will depend on factors such as the type of insurance you are seeking (extremely large term life policies upwards of $1 million in cover, single premium policies, annuities or large whole life or variable universal life policies are all high risk investments) and the longevity of coverage you are seeking (30 year term policies, large long-term annuities or long term care insurance policies will need extra caution).
Your state government also takes active interest in the stability of life insurance companies that do business within their territories. Look for your state’s insurance department website as they will likely have their own ratings methods as well.
When you’re shopping around for comparison quotes, use the services of an aggregator website that will do all of your work for you, including looking up life insurance quotes only from companies that have demonstrated fully the ability to meet their financial obligations in your time of need.
Pat Cassidy-Blonda is manager of public relations and marketing communications for AccuQuote. In addition to overseeing all corporate media relations, internal executive and employee communications, she plays a key role in the overall content development of the company’s online and offline marketing campaigns. This entails overseeing and implementing AccuQuote’s social media, blog and podcast strategies, as well as its word-of-mouth marketing campaign.