The financial stability of a life insurance company is very important. When shopping for term life coverage, don’t just look at the lowest cost premium from an insurance company you recognize. Make sure you look at the ratings by A.M. Best, Moody’s and other rating agencies. Consider the Comdex ranking also. The Comdex ranking is a composite of all the ratings that a company has received relative to all other insurance companies. The Comdex ranks companies on a scale of 1 to 100. The ranking should be at least 85, preferably in the 90s. For some life insurance products, the Comdex score should be in the mid 90s.
There is one life insurance company based in Atlanta that has very weak ratings. I recently looked at their web site and found the following:
A.M. Best: C+ (Marginal) A.M. Best provides an opinion of an insurer’s ability to meet long-term obligations to its policyholders. The opinion is rendered on a comprehensive quantitative and qualitative evaluation of a company’s balance sheet strength, operating performance and business profile. — Ratings are current as of June 2010. [I looked up their Comdex ranking: 32]
It’s hard to fathom that agents could sell life insurance products with the knowledge that the carrier is in such dire financial straits.
It is also important not to rely solely on the rating reports. A life or health insurance advisor should stay current on the financial stability of the major carriers. Recently, a major insurance company carrier had to ask for capital waivers. They said that if they don’t receive them they may have to stop writing new business. During their earnings release conference call it was revealed that they are not earning the cost of capital in any of their major businesses.
Consider that the company described above is one of the leading low-cost term life insurance companies. This information wouldn’t be available by checking the latest financial rating reports since it is “breaking news”.
Working with an informed insurance agent is very important in these tough economic times.
Greg Sanders Peachtree Insurance Advisors 678-236-1600 www.insuranceadv.com