When buying a life insurance product, you should use the same care you would when
making any sizable purchase. Ask your agent for financial information about the
company you are considering.
There are a number of commercial insurance rating services that rate the claims-paying
ability and financial strength of insurance companies. These published ratings can
be found in public and business libraries. Rating firms consider several important
factors when developing a rating, including profitability, capital adequacy, liquidity,
investment risk and management quality.
While all major rating services analyze each of these areas, analytical methods
vary and different services do not weigh all factors the same way.
When choosing a rating service, find out whether its company evaluations are comprehensive
and what is being measured. Be sure you understand what the various services measure
and what the different ratings mean. Also, check the rating date to be sure the
information is current. Ratings provide a snapshot of a company's financial condition,
companies can be upgraded -- or downgraded -- from one report to the next.
Keep in mind that not all companies are rated by every service. Companies usually
have to pay rating services for a comprehensive review. A company's lack of a rating
is not a poor reflection on that company; it simply has not gone through the evaluation
process with a particular service.
Finally, remember that while ratings can be helpful, they are only one factor, albeit
a very important one, worth considering when choosing a company. A company's reputation
for service to customers is another factor you should consider.