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.Â
Depending on the rating, youâll 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.Â
Largest credit rating agency in the world specializing in the insurance industry
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So, what makes this one rating company special? They arenât the only rating company out there, but they are the most notable and most widely used.
To quote A.M. Best, their rating system â. . . is an independent opinion of an insurerâs 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 companyâs balance sheet, strength, operating performance and business profile.â
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, with A.M. Best they have 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 towards getting a secure policy for you and your family.
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:
It’s obviously important to understand the rating scale of the insurance company before buying your life insurance.
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 youâre getting all the benefits you should be for what youâll pay in premiums. âWhat is A.M. Best ratingsâ 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.
Sure, itâs 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 doesnât have good financial strength, there is always a chance that the company could go bankrupt and your policy wouldnât 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 that 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 youâre really connected with the insurance industry, you probably donât 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, itâs 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 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.Â
|A.M. Best||Fitch||Standard and Poors|
|Superior ability to meet ongoing obligations||Exceptionally strong capacity to pay financial commitments||Extremely strong financial security characteristics. Highest S&P rating|
|Companies rated A+ are one “notch” lower than those rated A++||Very strong capacity to pay financial commitments||Very strong financial security characteristics|
|Very strong capacity to meet financial commitments||Strong capacity to pay financial commitment||Strong financial security characteristics|
|Good ability to meet financial obligations||Adequate capacity to pay financial commitments||Good financial security characteristics|
|Fair ability to meet financial commitments||Elevated vulnerability to default risk but has flexibility to service financial commitments||Marginal financial security characteristics|
|Marginal ability to meet their ongoing insurance obligations.||Significant risk of default with limited margin of safety||Weak financial security characteristics|
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.
When you start looking for a life insurance policy (or any other kind of insurance policy), itâs important that you look at the companyâs A.M. Best rating. While their rating shouldnât be the determining factor in your decision, itâs important to know that youâre buying a policy from a reputable company.
A faulty insurance company shouldnât keep you from getting the coverage that you and your loved ones deserve. Donât 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.
The post What is A.M. Best Ratings and Why Should You Care? appeared first on Good Financial CentsÂ®.
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