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Just as important as determining how much life insurance you should buy, and what type, is the strength of the insurance company from which you buy your policy.

When you get life insurance quotes, always evaluate the companies on their financial strength.

A company’s rating is a barometer of its ability to pay a claim down the road.

You should always keep tabs on your insurer. If you see it mentioned in the news, take a closer look. You can also evaluate your insurer by using tools offered by financial ratings firms, industry associations such as the Insurance Marketplace Standards Association (IMSA) and your own state’s insurance department.

IMSA offers the following suggestions for evaluating life insurance companies:

  • Be sure the company is financially strong. Many independent services rate the financial strength of life insurance companies.
  • Ratings may vary among services, and slight variations are normal, such as the difference between AAA and AA. Be aware that not all companies choose to be rated by every service, since rating services charge a substantial fee for such comprehensive reviews.
  • Check with your state’s insurance department to make sure the company is licensed in your state.

Ratings: Financial muscle

Five major ratings firms issue financial strength ratings for insurance companies: Standard & Poor’s, Fitch Ratings, A.M. Best, Moody’s Investors Service and Ratings (formerly Weiss Ratings).

Major ratings companies

A.M. Best

Fitch Ratings

Moody’s Investors Service: Call Moody’s Ratings Desk at (212) 553-0377 to request the rating of any company

Standard & Poor’s Ratings

A company’s rating is a barometer of its ability to pay a claim down the road. A high rating indicates the company has plenty of assets and reserves available to pay claims. Since life insurance claims are usually made many years after you purchase the policy, it’s important to keep an eye on your company’s financial strength.

Any number of factors can influence a rating. If a company makes some bad financial decisions and begins losing money, the rating could drop. Mergers — or even the news of a merger — can influence ratings.

You can find current S&P ratings with’s Insurance Company Ratings Lookup Tool. Each rating company has its own grading system, so you can’t compare the “A” rating of one to the “A” rating of another.

Ask your state

Trying to gauge the financial staying power of an insurance company is only part of the puzzle. As with any insurer, customer service is extremely important.

The insurance industry is regulated at the state level. That means each state has a different way of dealing with insurers and the consumers who complain about them.

Complaints can stem from a bad experience with an agent, to a misrepresented policy, to a problem with getting a claim paid.

Many states compile complaint reports each year, tallying the number of complaints made against insurance companies and ranking them in relation to their market share. If your state has such a report, you can better keep tabs on your insurer.

How many complaints are too many? There are no hard and fast rules, but if your insurer is continually at the top of the list for complaints, it may be cause for concern. Complaints can stem from a bad experience with an agent, to a misrepresented policy, to a problem with getting a claim paid.

Industry certification

The life insurance industry offers a “seal of approval,” the Insurance Marketplace Standards Association (IMSA) designation. After a number of years of bad choices, bad ethics and bad press in the 1990s, industry officials launched IMSA as a way to regain public trust.

In order to gain membership in IMSA, a life insurance company must undergo rigorous scrutiny by independent, qualified evaluators. The IMSA designation indicates a company maintains high standards, particularly in sales, marketing and customer service. See IMSA’s Web site for more.

So what does this mean? Since it’s a designation created by the industry itself, you shouldn’t put too much emphasis on IMSA membership. For one thing, IMSA itself isn’t an enforcement group. While the association can revoke certification should a member break the rules, it doesn’t have any power to fine or sanction offending members. In practice, a company could garner numerous customer complaints and still be an IMSA member.

IMSA membership is granted for three-year periods, so if IMSA drops its endorsement of your insurance company, that should raise a red flag.

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Penny Gusner


Penny is an expert on insurance procedures, rates, policies and claims. She has extensive knowledge of all major insurance lines -- auto, homeowners, life and health insurance. She has been answering consumers’ questions as an analyst for more than 15 years and has been featured in numerous major media outlets, including the Washington Post and Kiplinger’s.



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