When shopping for insurance, many consumers do not consider the financial strength of an insurance company. Rather, consumers typically focus on premium and deductible amounts. However, the financial strength and stability of an insurance company can prove to be the most significant factors of all, especially in cases in which an insurance company with a low (or lower) rating is chosen over a more highly rated company. This is because an insurance company that becomes insolvent or bankrupt may not be able to pay the claims of its policyholders – your claims.
, a company that evaluates and rates the financial health of insurance companies, conducts independent third-party evaluations of insurance companies to form an opinion regarding an insurance company's financial strength. Based on an evaluation of an insurance company's balance sheet, operating performance, and business profile, A.M. Best issues its Financial Strength Ratings, which have been recognized as benchmarks for assessing an insurance company's financial strength.
The Financial Strength Ratings assign letters to convey A.M. Best's opinion as to the strength of a particular insurance company. “Secure” insurance companies are graded as Superior (A++, A+), Excellent (A, A-), and Good (B++, B+). “Vulnerable” insurance companies are graded as Fair (B, B-), Marginal (C++, C+), Weak (C, C-), Poor (D), Under Regulatory Supervision (E), In Liquidation (F), and Suspended (S). Some insurance companies may not be rated by A.M. Best at all, or may be rated by Demotech®
, another insurance rating company. Similar to a grade on a report card, a higher rating suggests that, in A.M. Best's opinion, a particular insurance company is more likely to meet its ongoing obligations to policyholders as opposed to an insurance company with a lower rating. It is important to note that these ratings are not a warranty of an insurance company's financial health; they merely reflect A.M. Best's opinion based on its evaluation.
Although using an insurance company with a superior rating does not necessarily guarantee lasting financial strength and stability, our preference at Setnor Byer Insurance & Risk, given similar policy terms, is to always place our clients in the highest category assigned by A.M. Best, as opposed to lower-rated companies, or companies (like Citizens) that are not rated at all. Unfortunately, such insurance may not be available to you, or may result in premiums that are often double those of lower-rated carriers.
As we discussed with you when you ordered your policy, your decision to order a policy through a less than superior rated company (if applicable) was required by your situation: either because of the availability (or lack thereof) of a particular insurance product or because of the premium constraints demanded by your budget. Nevertheless, we believe it is important that you fully understand the risk you are assuming by electing to go with a lower-rated company or a non-rated company.
If you have any questions, or if you would like to consider an insurance company with a higher A.M. Best rating, contact us
, and we will be happy to discuss your options with you.