If you’re researching insurance companies to find the best one for you, there are dozens of factors you need to consider before you choose one.
You need to look at the rates, the products offered, the customer service, and you also need to look at the ratings for the company. If you’ve spent any time on life insurance companies’ websites, then you’ve probably seen the “Standard & Poor’s” rating.
But, what does it mean, and how can you use this rating to aid in your research?
When you’re shopping around for life insurance, you need to find the perfect company. Every applicant is different, and everyone has different needs. Something everyone should consider is the financial strength of the company.
One of the worst things which could happen is to purchase a policy from a company who is financially weak. In this article, we’ll explain what a rating from Standard & Poor’s means, and how it can help you to eliminate bad companies from your selection.
History of Standard & Poor’s
Standard & Poor’s Financial Services, LLC. is a subsidiary of the McGraw-Hill Companies, and they are one of the largest financial service companies in the world.
They were established back in 1860 by Henry Varnum Poor. Originally, they published the Henry Varnum Poor of History of Railroads and Canals in the United States. The book outlined the financial status and operations of United States railroad companies.
In 1906, the Standard Statistics Bureau was created by Luther Lee Blake. He wanted to publish a similar book for companies that were not railroads.
In 1941, Paul Babson bought Poor’s Publishing and merged it with Standard Statistics, which created Standard & Poor’s Corp.
After that, in 1966, the company was bought by McGraw-Hill Companies.
Standard and Poor’s has been rating life insurance companies since 1971. They are one of the leading companies in third-party ratings.
What (exactly) do they do?
The company uses a rating system to measure a companies creditworthiness.
This information is useful for investors or for any customers looking at insurance companies. You can use the Standard & Poor’s rating to help ease any concerns you might have about the stability of a company.
Life insurance is a long-term investment, and if you don’t have a reliable company, you might find yourself with no insurance protection.
When Standard & Poor begins to evaluate a company, they are going to look at their ability to pay any claims and creditors, how the company operates compares to other insurance companies, their earnings, their management, and much more.
All of these factors are reviewed and then ran through their rating system.
The Standard & Poor’s Rating Schedule
The company will issue a letter grade based on all of the factors. They have ratings from AAA to D.
- AAA is the highest rating and companies who receive this rating have a robust financial foundation.
- If a company receives a D, then they have defaulted on some of their debts or have faced serious economic problems.
While there are dozens of different ratings, they are broken into two main categories, investment grade, and non-investment grade. These categories are used for investors looking to put their money in a company.
But what if when you’re shopping around for life insurance, you run into a company who hasn’t been given a rating from Standard and Poor’s?
Should you avoid any company who doesn’t have a rating with them? Not exactly.
Just because Standard & Poor’s is one of the largest doesn’t mean they are a financially unstable company. There are dozens of reasons the company may not have a rating from them.
Ratings and How to Use Them
It’s easy to find the ratings for just about every life insurance company on the market.
But once you’ve found them, what do you do with them? It’s vital you know what to look for when you’re choosing between companies.
If you’re comparing one company with an AA rating and an AAA rating, the difference between them is minimal, and you shouldn’t automatically choose the company which has the better rating.
On the other hand, if you’re deciding between a company who has a B rating versus one that has an AA rating, the grades are going to play more of an impact.
Typically, I would rarely recommend a company with a “B” rating, or lower, of any kind.
Working with an Independent Insurance Agent
There are over 800 companies on the market, and all of them have different ratings, products, customer service, riders, and much more.
When you’re shopping for life insurance, it can be extremely overwhelming. The best way to find the perfect life insurance is to work with an independent insurance agent, like us.
Unlike a traditional agent, independent insurance brokers work with dozens and dozens of highly rated companies across the nation.
Instead of having to spend time researching companies and finding their ratings, we, as independent agents, can bring a personalized set of quotes from a large cross-section of companies. We can save you both time and money on your insurance search.
Because you never know what’s going to happen tomorrow, you shouldn’t wait another day to get the life insurance protection your family deserves.
We know nobody wants to think about anything tragic happening to them, but not planning for your passing is one of the worst mistakes you could make.