Rating the Company

A key to insurance ratings.

March 25, 2003

Ever since two of the nation's largest insurers -- Mutual Benefit Life and Executive Life -- collapsed in the early 1990s (along with several smaller companies), it's been clear that no one should take an insurance company's health for granted.

The professional rating agencies, whose job it is to judge the financial soundness of insurance companies and make the results public, have attempted to toughen their standards and they remain, for better or worse, the best defense consumers have against being stung. Before you buy any policy, but particularly whole life, check the health of the issuing company by learning how it is graded by major rating agencies.

Making sense of the ratings

You can get insurance-company ratings in libraries, from agents or directly from the rating agencies. They're easy to get, but not so easy to decipher.

To illustrate: An A+ is the second highest grade from A.M. Best, but fifth from the top on Standard & Poor's and Duff & Phelps's scales. Moody's Investor Service's fifth-best rating is A1.

No high rating will ensure safety for years down the road. But to find companies in good health today, limit yourself to insurers that rate an A++ or A+ from Best, a B or above from Weiss, or at least an AA from S&P, Moody's or Duff & Phelps.

The table below lists the various ratings and what they mean.

A.M. Best's annual compilation of ratings and commentary, Best's Insurance Reports, is available in many libraries. You can also check Best's Web site.

You can get individual ratings of claims-paying ability at no cost from Standard & Poors.

Or check Moody's for its credit ratings of insurance companies.

An individual rating from Weiss by phone costs $15, charged to your credit card. A one-page report on a company costs $25, or three for $55. You may get more information at the company's Web site.

How Do You Get the Best Policy at the Best Price?