When you are selecting an insurance company, it is important that you are aware of the insurer’s financial strength. Luckily, there are financial rating companies that do the hard work for you. One of these companies is A.M.
Depending on the rating, you’ll be able to determine which insurance company is best for you.
It should be noted, A.M. Best is not the only rating company. There are several others, like the Fitch rating and Standard and Poors.
Table of Contents
A.M. Best Ratings AT A GLANCE
| Year Founded | 1899 |
|---|---|
| Size | Largest credit rating agency in the world specializing in the insurance industry |
| HQ Address | Ambest Road
Oldwick, NJ 08858 United States |
| Phone Number | +1 (908) 439 2200 |
A.M. Best Company Information
So, what makes this one rating company special? They aren’t the only rating company out there, but they are the most notable and most widely used.
To quote A.M. Best, their rating system “. . . is an independent opinion of an insurer’s financial strength and ability to meet its ongoing insurance policy and contractual obligations. It is based on a comprehensive quantitative and qualitative evaluation of a company’s balance sheet, strength, operating performance, and business profile.”
Aside from giving the companies a letter grade on their scale, the rating company also includes an outlook projection. They give them an outlook of either positive, negative, or stable. While these are just guesses, A.M. Best has research and previous information to base their outlooks on.
A.M. Best provides a way for each company to see just where they rank with consumers and helps them know just what they have to do to correct their mistakes.
Finding out what is A.M. Best ratings for insurance companies is the first step toward getting a secure policy for you and your family.
How Does A.M. Best Insurance Ratings Scale Work?
For a professional company, using a basic method of grading insurance companies has proven to be an effective and helpful tactic. Here’s how the A.M. Best Insurance rating scale works:
- A++, A+, A, and A- all identify the top insurance companies. Receiving an A for the company shows how financially strong they are, how capable a company is of guaranteeing your policy and keeping it secure.
- B++, B+, B, and B- ratings rank companies as good for those who can’t afford what higher-ranked companies offer their services for. With a B ranking, you can depend on the company to provide a secure policy for affordable rates and rely on them to help your family get the help they need once you’re gone. For client knowing that their family has something to fall back on during difficult times is a welcome relief.
- C++ and C+ are the only two scores for the C category, indicating an average insurance company. There are no bells or whistles attached, just a straightforward policy with straightforward premiums, a great choice for the first time you buy life insurance.
- A ‘D’ rank is only reserved for companies that fall below A.M. Best’s minimum standards, an E rank means the company is under state supervision, and an F rank is only for companies going into liquidation. Any rating below a C shows how unreliable the company is within the industry.
It’s obviously important to understand the rating scale of the insurance company before buying your life insurance.
A.M. Best Ratings for Insurance Companies
Now you have an understanding of what is A.M. Best ratings and how they work. A visit to the A.M. Best website is the perfect choice when looking for an insurance company. A company’s ranking shows just how dependable they are and if you’re getting all the benefits you should be for what you’ll pay in premiums. “What is A.M. Best ratings?” is a question best asked when beginning to search for a policy, a question that can make your search easier and simpler than you originally thought.
Why A.M. Best Matters
Sure, it’s nice to find a company with an A+ rating, but does it matter? How does it impact you or your life insurance policy?
These ratings are a good indicator of how much you can trust your insurance company. If a company doesn’t have good financial strength, there is always a chance that the company could go bankrupt and your policy wouldn’t be paid out, which is a terrible turn of events.
There is no way to predict the future or what could happen to a company, but rating systems give us more direction than completely guessing. The A.M. Best ratings give you an idea of the past and stability of a company without you having to do the research yourself.
Unless you’re really connected with the insurance industry, you probably don’t know which insurance companies have been around the longest or which ones have experienced financial problems in the past.
Because life insurance is such an important purchase, it’s vital that the company that you choose is going to be around for hundreds of years to come. Life insurance gives you, and your loved ones the peace of mind and financial coverage that they need in case something tragic were to happen.
How Do A.M. Best Ratings Compare?
How does A.M. Best compare to other popular rating companies? A.M. Best is not the only company on the market that rates insurance. A few other popular options are Fitch and Standard and Poors.
Below, we compared A.M. Best, Fitch, and Standard and Poors. In this table, it is important to note that though the ratings may appear in the same row, it does not mean they are equal to each other. For example, Fitch’s AA rating may differ from Standard and Poors.
Ratings of Insurers’ Financial Strength
A.M. Best Fitch Standard and Poors
A++, A+ AAA AAA
Superior ability to meet ongoing obligations Exceptionally strong capacity to pay financial commitments Extremely strong financial security characteristics. Highest S&P rating
Not Applicable AA AA
Companies rated A+ are one "notch" lower than those rated A++ Very strong capacity to pay financial commitments Very strong financial security characteristics
A, A- A A
Very strong capacity to meet financial commitments Strong capacity to pay financial commitment Strong financial security characteristics
B++, B+ BBB BBB
Good ability to meet financial obligations Adequate capacity to pay financial commitments Good financial security characteristics
B, B- BB BB
Fair ability to meet financial commitments Elevated vulnerability to default risk but has flexibility to service financial commitments Marginal financial security characteristics
C++, C+ B B
Marginal ability to meet their ongoing insurance obligations. Significant risk of default with limited margin of safety Weak financial security characteristics
History of A.M. Best
Alfred Best founded A.M. Best Company in 1899. A.M. Best is one of the oldest and most established rating companies in the world. They were established with the goal of reporting the financial stability of insurance companies. They currently have ratings for companies that are in more than 80 different countries across the world.
Bottom Line
When you start looking for a life insurance policy (or any other kind of insurance policy), it’s important that you look at the company’s A.M. Best rating. While their rating shouldn’t be the determining factor in your decision, it’s important to know that you’re buying a policy from a reputable company.
A faulty insurance company shouldn’t keep you from getting the coverage that you and your loved ones deserve. Don’t be one of the countless stories of a family that suffers the loss of a family member and then learns that they have thousands of dollars of debt and no way to pay for it.
I don’t know of any insurance companies (carriers or brokers) that put any weight in AM Best’s ratings. I think their ratings model is about to change and after doing some research, I couldn’t find any relevant or current info from credible news or financial outlets, outside of AM Best.