How Can I Determine the Financial Strength of My Insurance Company?

How do you compare life insurance companies? What features do you examine? What criteria do you use? How do you know what to look for? Making sure that your insurance company is financially sound is an important part of helping to ensure family security.

Fortunately, there are a number of independent companies that make these evaluations. These rating companies carefully examine each insurance company in the areas of profitability, debt, liquidity, and other factors. From the results of these examinations, they then issue overall ratings.

Looking up a company’s rating will provide you with a snapshot of that company’s financial health. Tracking the company’s rating on a regular basis may give you some advanced warning of trouble.

The four most prominent rating companies are A.M. Best, Standard & Poor’s, Moody’s Investors Service, and Fitch Ratings. Each of these services uses slightly different criteria when rating companies. As a result, each may have a slightly different view of a given company. A.M. Best ratings are based on financial conditions and performance; Moody’s, Fitch Ratings, and Standard & Poor’s ratings are based on claims-paying ability.

You should be able to find copies of at least one of these ratings in the reference section of your local library. If you are unable to find them, or if the ratings in your library are outdated, you can contact the services directly. All four services will provide ratings over the phone.

A.M. Best Company: 908-439-2200, www.ambest.com

Standard & Poor’s: 877-772-5436, www.standardandpoors.com

Moody’s Investors Service: 212-553-0377, www.moodys.com

Fitch Ratings: 800-893-4824, www.fitchratings.com

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2012 Emerald Connect, Inc.

Joe Swanson is licensed in MN, WI, IA, and SD to offer insurance products, and life insurance (including variable life), annuities (including variable annuities), and is securities registered in CA, IA, MN, ND, NJ, NM, OH, SD, WI, and WV and adviser registered in MN. Cindy Henry is licensed in MN, NE, OH, and WI to offer insurance products, and life insurance (including variable life), annuities (including variable annuities), and is securities registered in IL, MN, WI, and WV and adviser registered in MN. Peter Hyjek is licensed in CA, GA, IA, MN, ND, NE, OH, and WI to offer insurance products, and life insurance (including variable life), annuities (including variable annuities), and is securities registered in CA, FL, GA, IA, IL, MN, MO, ND, NJ, OH, WA, and WI and adviser registered in MN. Andy Tighe is licensed in MN to offer insurance products, and life insurance (including variable life), annuities (including variable annuities), and is securities registered in MN and WI and adviser registered in WI.

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Insurance products from the Principal Financial Group® are issued by Principal National Life Insurance Company (except in New York), Principal Life Insurance Company, and the companies available through the Preferred Product Network, Inc. Securities and advisory products offered through Princor Financial Services Corporation, 800/247-1737, member SIPC. Principal National, Principal Life, the Preferred Product Network and Princor® are members of the Principal Financial Group®, Des Moines, IA 50392. Joe Swanson, Cindy Henry, Peter Hyjek and Andy Tighe, Principal National and Principal Life Financial Representatives, Princor Registered Representatives, Financial Advisors.

Principal Life maintains certificates of authority to transact insurance in all 50 states. Principal Life NAIC identification number is 61271. Principal National NAIC identification number is 71161.