Life insurance company ratings: What you should look for

They’re not infallible guides, but insurance ratings services are the customer’s best tool for gauging the quality of a life insurance company. Here’s a quick guide to the best-known services.

By Mary Pollman – SelectQuote

When you’re shopping for life insurance, cost is usually the first thing you focus on. But as soon as you’ve picked a group of policies in your price range, your next step should be some online research on the quality of the life insurance companies offering them.

The best place to do that is the websites of the insurance ratings services.

Start with A.M. Best (www.ambest.com)
Start your search by Googling “A.M. Best” or enter their url in your browser.

Finding a rating is relatively easy. There’s a “Ratings & Analysis” box at the upper left on the A.M. Best home page. Make sure the “Insurance” radio button is selected, then enter a company name in the box and click on “Find.”

If you’re researching a company that’s part of a large insurance group, odds are the next page will list several sister companies. We searched on “Genworth,” and a list 17 company names came up. The companies under one corporate umbrella can have very different ratings, so make sure you know which of the companies would be issuing your policy. SelectQuote makes that easy. When you click on “Companies We Represent” on SelectQuote’s home page, you see the companies’ full names.

A.M. Best rating is the benchmark
A.M. Best highlights and bolds the companies’ ratings under the “Financial Strength Ratings” headings. That rating is probably the most important tag any life insurance company wears. When a company is referred to as an “A+ company,” that doesn’t mean they’re A+ with S&P or Moody’s or Fitch. It means they’re A+ with A.M. Best.

Best’s all-important Financial Strength Ratings scale is as follows:

Secure Vulnerable
A++, A+ (Superior) B, B- (Fair)
A, A- (Excellent) C++, C+ (Marginal)
B++, B+ (Good) C, C- (Weak)
D (Poor)
E (Under Regulatory Supervision)
F (In Liquidation)
S (Rating Suspended)

Insurance company ratings can change rapidly
At the bottom of the Best page that lists the companies in a corporate group, e.g., all the Genworth companies, you’ll see the date and time of your search. Ratings can change rapidly.

In the past, Best batched their ratings releases once a year, but their antenna have been sharpened and their practices have changed due to some miscalls or late calls they made in the 1980s and ‘90s. A few life insurance companies were placed under “regulatory supervision” (they were no longer being run by their managers but by the insurance regulators of their domiciliary states) while their official A.M. Best rating was still A+. Oops.

A.M. Best now issues rating updates weekly, and if a company’s situation is volatile, the Best rating may change at any time.

Additional information from A.M. Best will cost you
If you click on an individual insurance company name in the list, you’ll go to a page with a little more information – such as the date Best assigned the company’s current rating. But if you really want to find out what Best thinks about the company, look under the “Reports and News” subhead and click on the “news and press releases” link.

Because Best publishes weekly and daily email newsletters and a monthly print publication, you are likely to find that they have gathered quite a bit of news on the insurance company in question. But to read an article, you have to subscribe to the Best publication that carried it. If you want to read the detailed A.M. Best analyst’s report on the company, you can, but the download will cost you $75.

Other insurance ratings services
A.M. Best isn’t the only rater of life insurance companies. Standard & Poor’s, Moody’s and Fitch also rate insurance companies’ financial strength.

Standard & Poor’s (www.standardandpoors.com)
S&P doesn’t post ratings on their website, and they charge quite a bit for their information. One-page press releases announcing ratings changes run $100 apiece. A full analysis of an insurance company costs $400. However, in the search box on the home page, I entered a full company name, and on the search results screen, an article digest happened to mention the company’s rating. You may also get lucky.

Moody’s (www.moodys.com)
Moody’s seems to offer the opportunity to register for free access to their insurance company ratings information. But after I had filled out the lengthy registration form and clicked on the checkbox beside “I agree to Moody's Terms Of Use and Privacy Policy,” a popup box appeared telling me I had to scroll through the terms of use and privacy documents. I had already done so, but I did so again. And again. I switched to another computer and used another browser. Still no luck. I couldn’t get Moody’s system to accept my checkoff. So I was forced to give up.

Fitch (www.fitchratings.com)
Fitch analyzes how well capitalized insurance companies are. Fitch makes it easy to view its rating for a company. Just enter the company name in the search box on the home page. However, you have to be a paid subscriber to see the press release announcing the rating or to see the research behind the rating.


Bottom line: You get the most – and the most highly regarded – information on insurance company quality from A.M. Best. Don’t buy a life insurance policy until you at least know what the insurance company’s A.M. Best rating is. Checking the other insurance ratings services – S&P, Moody’s and Fitch – won’t hurt, but you may not learn much.

About the author. Mary Pollman, CLU, has been writing about life insurance, long-term care insurance and annuities for more than 20 years. She has contributed to insurance publications, websites, consumer product literature and agent training. Mary held senior management positions in communications and marketing with two life insurance companies. She is an editorial advisor to SelectQuote.

If you already have group life insurance, do you need individual life insurance?

Group life insurance is great, but if that’s all you have, there’s a big hole in your family’s life insurance safety net.

By Mary Pollman – SelectQuote

In 2006, 47% of all life insurance in force was group life insurance.* Many Americans have no life insurance except group life insurance. Should you? Here are some tips to help you decide.

1. Think about whether your group life insurance death benefit would meet your family’s needs if something happened to you. The national average for group life coverage is $50,200, according to the ACLI,* but the range is broad. Some employers’ plans offer a flat $10,000 or $20,000 of coverage no matter what your salary is. Others peg the benefit to your annual salary – 1x, 2x or 3x. (2x and 3x are only available to managers, at many companies. Or these higher amounts are only available if you pay part of the premium.)

If you have a family to protect, many advisors say you should have life insurance that would pay at least 7x your annual salary. So, while group life insurance will help get you there, it usually isn’t all you need.

2. Think about how long you’re likely to work for your current employer. Your group term life insurance generally terminates when you leave your job. If your new employer has an equivalent group life plan, you’ll be fine. But they may not. As with all other employee benefits, the trend is away from employer-paid to employee-paid. So you may get equivalent group life coverage, but you may not get it free.

Or, you may want to consider self-employment as your next career move. If group life insurance was all you had, you’re suddenly uninsured. Some employers offer group life insurance plans with a conversion option – an option to turn your group life coverage into an individual life insurance policy. But that’s rare unless you have been contributing to the premiums in the group policy.

3. Think about whether you can pass a medical exam for individual coverage. This is one of the big pluses for group life insurance. Most individual life insurance policies are medically underwritten. You’ll be asked health questions, and typically, you’ll have to have a medical or paramedical exam. Group life insurance usually involves no health questions at all – let alone an exam. So, if your health isn’t good, group life insurance can be very important for you.

4. Think about what you can afford. Group life insurance is one employee benefit that is still free to employees in many companies. Individual life insurance, obviously, is not free, however if you are in reasonably good health and you use a licensed independent sales agency to shop highly rated Term Life Insurance companies for your best rates, you should find it surprisingly affordable.

Group life insurance premiums are, up to a point ($50,000 coverage) tax-free, which isn’t the case for privately owned life insurance. If you own an individual life insurance policy, you pay the premiums with after-tax dollars, but the death benefit is tax-free.

Group life insurance is a good thing. But very few group life policies pay as much as families need when a breadwinner dies. And your group life coverage may disappear when you change jobs.

Group life insurance is a nice supplement, good while it lasts. Not the foundation of your insurance portfolio. As long as your health and your budget allow, your mainstay should be individual life insurance, owned by you.

* From an article on the website of the American Council of Life Insurance (ACLI), “House Passes TRIA Reauthorization with Group Life Insurance Provisions,” September 19, 2007. (http://www.acli.com/ACLI/Newsroom/News+Releases/NR07-061.htm)

About the author. Mary Pollman, CLU, has been writing about life insurance, long-term care insurance and annuities for more than 20 years. She has contributed to insurance publications, websites, consumer product literature and agent training. Mary held senior management positions in communications and marketing with two life insurance companies. She is an editorial advisor to SelectQuote.

Term Life Insurance with Money Back

Return-of-Premium (ROP) term life insurance has become very popular. It’s no wonder. You can get all your premium payments back if you’re alive and well at the end of the policy term.

By Mary Pollman – SelectQuote

Ah, simplicity. That’s one of the things to love about Term Life Insurance. It always a little sad when an insurance company turns a straightforward term life insurance policy turn into a patchwork of special features and odd contingencies – “The policy does this if you get disabled; this if you die in an accident; this if you die but not in an accident, this if your spouse dies first . . . “
But biased as we are toward simplicity, there is a variation on the basic level-premium term formula that’s very attractive. It’s Return-of-Premium (ROP) term.

And it’s really simple.

How a Return-of-Premium policy works
If you buy a basic, non-ROP 30-year term life insurance policy, you pay the same amount every year for 30 years. When 30 years is over, your bet with the life insurance company is up – and though you win (in a manner of speaking), they keep the money.

If you buy a return-of-premium 30-year term life insurance policy, same thing. Except that you get your money back.

You will pay more for return-of-premium policies. And you don’t get your money back with interest. The interest is what the life insurance company gets out of the deal – for having taken a risk with you for 15, 20 or 30 years. It seems pretty fair.

Most ROP plans are structured so that you not only get back your money at the end of the term, you can get some of it back if you surrender the policy early. There will be rules about how the early refunds work, so be sure to read the fine print.

ROP makes a big decision a little easier
If you’re hesitating about buying life insurance, even though you know you need it, an ROP policy may make the decision easier. For example, you may not be 100% convinced you need a life insurance policy for 30 long years, but if you know you’ll be getting all your money back, it’s easier to go ahead and do it.

It’s important to be comfortable about the insurance company’s longevity when you’re buying this kind of policy – but then that’s paramount with any life insurance policy.


About the author. Mary Pollman, CLU, has been writing about life insurance, long-term care insurance and annuities for more than 20 years. She has contributed to insurance publications, websites, consumer product literature and agent training. Mary held senior management positions in communications and marketing with two life insurance companies. She is an editorial advisor to SelectQuote.
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ROP or not ROP. For many term life insurance buyers, that is the question. A SelectQuote Licensed Expert can help you find the answer. They can show you options for term life insurance policies with and without return-of-premium. All from companies with high ratings. Quotes are free. Call toll-free 1-888-739-7965. Or go to our website, www.selectquote.com/home9 .

Life Insurance Policy Riders: Worth the Money?

By Mary Pollman – SelectQuote

Life insurance is such a simple concept. I pay X for a policy that will pay Y if I die in the next Z years.

So why do so many life insurance policies seem so complicated?

One reason is riders. Riders are add-ons. They give you an extra benefit for an extra cost. Sometimes that’s good. But sometimes it’s like the upsell at the cash register – Would you like fries with that? – when all you really wanted was the burger.

The add-ons are expensive
At fast food establishments, the add-ons are expensive if you consider the inherent value of the item. Fountain drinks, for example. They may cost the restaurant less than a dime in syrup and soda water. They may cost you a dollar.

That’s the way it is with some life insurance riders too. The base policy may be a great value. But that’s typically not true of riders. So if you load up the policy with riders, you may be adding attractive features, but you should be aware that you’re probably paying top dollar for them.

And sometimes the add-ons sound a lot more useful than they really are.

Case in point: The Accidental Death Benefit rider
A rider that is often sold with term life insurance policies is the Accidental Death Benefit rider. If you buy one of these riders, and if you die in an accident, you’ll typically get the same death benefit as your base term life insurance policy. So, if you buy a $500,000 base term policy and add an Accidental Death Benefit rider, your family will get an extra $500,000 – a total of $1,000,000 – if you die in an accident.

$500,000 Base Policy Death Benefit
$500,000 Accidental Death Benefit (same as base policy amount)
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$1,000,000

At first blush, it kind of makes sense. But actually it’s rare that a family really needs extra money just because the breadwinner died in an accident. Often, it’s just the opposite – a long illness followed by death can be a much bigger financial drain.

Better solution: Just buy more term life insurance – or buy nothing
So, in this case, either your family really needs $1,000,000 no matter how you die, or they’ll be okay with the $500,000. In the former case, you should just buy more low-cost term. In the latter, you shouldn’t buy anything extra at all. In either of these cases, the Accidental Death Benefit rider is the wrong way to go. The one who really benefits is the life insurance company who got you to pay XX% more in premiums without taking on much risk that they’d actually have to make that big payout.

About the author. Mary Pollman, CLU, has been writing about life insurance, long-term care insurance and annuities for more than 20 years. She has contributed to insurance publications, websites, consumer product literature and agent training. Mary held senior management positions in communications and marketing with two life insurance companies. She is an editorial advisor to SelectQuote.

Get good advice on whether riders will add value to your policy – or just expense.
A SelectQuote Licensed Expert can show you options for term policies from highly rated Term Life Insurance companies, and they can give you candid advice on which riders are worthwhile. Quotes are free. Call toll-free 1-888-739-7965 . Or go to our website, www.selectquote.com/home9 .

Term or Permanent Life Insurance: Which Should You Buy?

There is rarely a good reason to pay the high price of permanent life insurance. The big difference between term and “perm” isn’t protection, it’s cost.

By Mary Pollman – SelectQuote

The point of life insurance, for most people, is to provide a substitute estate in case their life isn’t long enough to permit them to create one the regular way – by spending 50 or 60 years earning and investing. If life is cut short, life insurance steps in and compensates.

If you have a young family and a fledgling career, it’s quite a while before you’re going to have a comfortable bank account and a healthy and hearty investment portfolio. You need life insurance. Or maybe you’re making nice progress on that investment portfolio, but you have three kids in college simultaneously. If something happens to you, your assets may not quite get all three of them to graduation. So you, too, need life insurance.

A temporary versus a permanent need for life insurance
In either of these cases, your need for life insurance protection is temporary. In fact, in most people’s lives, the need for life insurance is temporary. Many continue to own expensive permanent policies, paying hefty premiums year after year, long after the policies have outlived their usefulness – long after their loved ones have ceased to need protection, or after their assets have grown to the point where they [the assets] can do all the protecting that’s necessary.
There are certainly cases where permanent life insurance is appropriate. Let’s say you have a child with Down Syndrome. That child will need your support long after you’re gone. It’s hard to be sure your assets alone will be adequate. Your need for life insurance could definitely qualify as permanent. Or you may want to buy a policy to benefit a charity. In that case, you have to buy permanent life insurance so there’s no (or almost no) chance you can outlive the policy.

However, in many, many cases, people can foresee an end to their need for life insurance, can estimate how many more years they’ll need it. If that’s the case for you, term is probably the way to go.

Getting the most life insurance for the money
If the goal is maximizing the payout to your family for the price you pay, term almost always beats permanent. Bottom line, you should approach your research on life insurance with the assumption that your need is probably temporary and that term will be the better fit. Prove to yourself it’s not before you pay the high price of permanent life insurance.

About the author. Mary Pollman, CLU, has been writing about life insurance, long-term care insurance and annuities for more than 20 years. She has contributed to insurance publications, websites, consumer product literature and agent training. Mary held senior management positions in communications and marketing with two life insurance companies. She is an editorial advisor to SelectQuote.

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There’s no better guide to help you explore the wide world of quality term life insurance than SelectQuote. A SelectQuote Licensed Expert can show you many options for term policies from highly rated Term Life Insurance companies. The term policies are inexpensive. The quotes are free. Call toll-free 1-888-739-7965. Or go to our website, www.selectquote.com/home9 .