Choosing A Company

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.