A life insurance policy is a big commitment. Term policies can last anywhere from 10 to 30 years, and universal life and whole life policies will be with you for the rest of your life. In addition to the contract length of a policy, the biggest benefit will be the financial protection the life insurance will provide to your loved ones should you pass.
That’s why it’s so important to find a life insurance company you can trust. You will want that peace of mind knowing that your life insurance policy will still be there decades from now and that the company you choose for your coverage will be able to pay the death benefit to your beneficiary when that time comes.
Unfortunately, no one can predict the future.
So how can you know if you can trust a life insurance company and their ability to be around to pay out on a potential claim in the future?
For this, we rely on the information from rating agencies that rate the financial strength of life insurance companies. These agencies are independent and not tied to any company. Their ratings are completely objective and can help you get a sense of how much trust you can put in life insurance companies.
One of the biggest names in life insurance ratings is AM Best. If you’ve spent any time searching for life insurance or have received any comparison quotes, you are likely to have seen an AM Best letter score mentioned next to the life insurance company. Companies with great ratings will also often put their AM Best scores on their website to let you know they’re highly rated and trustworthy.
An AM Best score is a credit rating for life insurance companies. Just like your personal credit rating is a measure of how likely a credit bureau thinks you are to meet your financial obligations towards paying on debt, a life insurance credit rating measures a company’s ability to meet its financial obligations to its customers. That obligation is its ability to pay out on death benefit claims both present and in the future.
If you are concerned about choosing a solid and reputable life insurance company, we will teach you how AM Best ratings can help and which companies have the strongest ratings in 2021. Read on to learn more about AM Best determines its ratings and what they mean for you.
About AM Best Company
AM Best is the oldest insurance rating agency in the country. It was founded in 1899 by Alfred M. Best hence the company name AM Best. The rating agency really made a name for itself after the infamous San Francisco earthquake of 1906.
The earthquake took a large toll on the city, resulting in more than 3,000 deaths, with over 28,000 buildings destroyed. As a result, twelve insurance companies went bankrupt in the aftermath, leaving policyholders in a bad situation.
As a result, AM Best published firsthand reports on the losses of the fire insurance companies involved in the San Francisco Earthquake, leading to publishing financial strength ratings of life insurance companies in 1907.
The information not only helped people rebuild and recover, but it also made AM best a trusted name around the country when it comes to choosing a life insurance company.
Today, AM Best is widely recognized as one of the most trusted and respected rating agencies in the business. The company’s ratings are designed to help customers get helpful information about the financial strength and the stability of life insurance companies.
The ratings are objective and based on over 100 years of insurance experience. With a glance at an AM Best rating, you can get a great idea of how well a company is doing and how well it will do in the future.
How AM Best Ratings Are Determined
AM Best gives each company a letter grade. Just like in school, letter grades can stand alone or have plus and minus signs along with them. The plus or minus signs are referred to as notches. The letter grade is a credit rating for each insurance company. Financial data is analyzed regularly, and ratings are updated when the data changes.
The ratings are based on four key measures of financial strength:
Operation Performance
Operation performance is a measure of the company’s earnings. It looks at all the sources of the company’s income and measures the sources against any debts or liabilities of a company. AM Best is looking for companies with earnings that are stable, sustainable, and collected from multiple sources. Companies that perform well have consistent earnings that aren’t in danger of dipping and that well outpace any debts they incur.
Enterprise Risk Management
Risk management is an important measure of any company. AM best looks at financial records to see if the company has a risk management plan appropriate for their risk profile. Companies that perform well have a structure that can act as a backup during unexpected financial hardship.
Balance Sheet Strength
The balance sheet strength is a measure of how much money a company has at any current time and how well the company is generating new income. Companies that perform well have high earnings that are generated quickly and easily.
Business Profile
The business profile looks at data like how well a company’s stocks are performing, how well a company’s products are being marketed and distributed, and how well the company is being managed. Companies that perform well have efficient management, top-performing stocks, and products that are easy for customers to buy.
Together, this information helps AM Best determine how well a company is performing now and how well they’re likely to perform in the future. They use this information to give companies a rating. Each rating is decided by a committee that analyzes all the data to develop an objective grade.
AM Best Financial Rating Scale Breakdown
The AM Best rating scale is an independent opinion of an insurance company’s financial strength and ability to meet its ongoing insurance policy and contract obligations it has to its policyholders.
When viewing company ratings, an insurance company with a high letter grade rating such as an (A++, A+, A, A-, B+ or B++) would be a company that AM Best has determined in their own opinion having the ability to meeting these financial obligations and are not viewed as vulnerable.
A company with a fair or poor rating is a company AM Best thinks might have trouble paying out some of its policies and labeled a vulnerable insurance company.
AM Best ratings are Financial Strength Ratings (FSRs). The grades, or FSRs, are broken into subgroups. Companies that earn a letter grade of A++ through B+ are considered financially strong.
Any company with one of these grades will be able to meet all of its financial obligations. Ratings within this top group are broken down into individual letter grades as shown below:
| Rating Categories | Rating Symbols | Rating Notches | Category Definitions |
|---|---|---|---|
| Superior | A+ | A++ | These are the highest ratings that AM Best gives. The companies that score these grades are classed as superior insurance companies. These top companies have demonstrated a superior ability to meet their ongoing insurance obligations in the opinion of AM Best. |
| Excellent | A | A- | These are the second highest ratings that AM Best gives. The companies that score these grades are classed as excellent insurance companies. Companies with an A or A- have demonstrated an excellent ability to meet their ongoing insurance obligations in the opinion of AM Best. |
| Good | B+ | B++ | These are the third highest ratings that AM Best gives. The companies that score these grades are classed as good insurance companies. Companies with a B or B++ rating have demonstrated a good ability to meet their ongoing insurance obligations in the opinion of AM Best. |
Companies with less of an ability to meet their financial obligations will be graded an FSR below B+. These companies are in the opinion of AM Best, are viewed as vulnerable. Vulnerable companies may run the risk of not meeting the financial obligations it has to its policyholders. The lower the company’s grade, the more vulnerable they are to economic downturns or changes to underwriting standards. Vulnerable grades range from B to D and include:
| Rating Categories | Rating Symbols | Rating Notches | Category Definitions |
|---|---|---|---|
| Fair | B | B- | The B and B- letter ratings are assigned to insurance companies that in the opinion of AM Best have a fair ability to meet ongoing insurance obligations to policyholders. Financial strength is vulnerable to adverse changes in underwriting and economic conditions. |
| Marginal | C+ | C++ | The C+ and C++ letter ratings are assigned to insurance companies that in the opinion of AM Best have a marginal ability to meet ongoing insurance obligations to policyholders. Financial strength is vulnerable to adverse changes in underwriting and economic conditions. |
| Weak | C | C- | The C and C- letter ratings are assigned to insurance companies that in the opinion of AM Best have a weak ability to meet ongoing insurance obligations to policyholders. Financial strength is very vulnerable to adverse changes in underwriting and economic conditions. |
| Poor | D | - | The D letter rating is assigned to insurance companies that in the opinion of AM Best have a poor ability to meet ongoing insurance obligations to policyholders. Financial strength is extremely vulnerable to adverse changes in underwriting and economic conditions. |
Financial Strength Non-Rating Designations
| Designation Symbols | Designation Definitions |
|---|---|
| E | This letter designation is for insurers that are publicly placed, via court-ordered into conservation or rehabilitation, or the international equivalent, or in the absence of a court order, clear regulatory action has been taken to delay or otherwise limit policyholder payments. |
| F | This letter designation is assigned to insurers publicly placed via court-order into liquidation after a finding of insolvency, or the international equivalent. |
| S | This letter designation is assigned to rated insurance companies to suspend the outstanding FSR when sudden and significant events impact operations and rating implications cannot be evaluated due to lack of timely or adequate information; or in cases where continued maintenance of the previously published rating opinion is in violation of evolving regulatory requirements. |
| NR | This designation is assigned to insurance companies that have not been rated by AM Best or a previously rated that has not undergone updated evaluation. |
Credit Issuer Ratings
In addition to Financial Strength Ratings, AM Best issues a separate rating called Issuer Credit Ratings (ICR). These ratings can be broken down into two separate segments: Long-Term Issuer Credit Ratings (Long-Term ICR) and Short-Term Issuer Credit Ratings (Short-Term ICR).
Long-Term Issuer Credit Ratings (Long-Term ICR) are ratings given by AM Best based on an insurance company’s ability to meet its ongoing senior financial obligations.
Short-Term Issuer Credit Ratings (Short-Term ICR) are ratings given by AM Best based on an insurance company’s ability to meet its original maturities, generally less than one year.
Credit Issuer Ratings, both long-term and short-term, also assign letter grades to insurance company’s similar to the AM Best Financial Strength Rating model.
The grading scale for long-term ratings ranges from AAA to C. Insurance companies with a grade of BBB-, or higher is a company that AM Best thinks is very strong and will pay all its policies in the future. Companies of a BB or lower mean that a company is vulnerable.
Short-term ratings also use a set of letter gradings that range from AMB-1+, the strongest rating, to AMB-4, equivalent to the lowest rating.
While credit issuer ratings are important, the AM Best Financial Strength letter scale is mostly used to determine the overall strength of a particular life insurance company. It is what is generally displayed on quote comparison results and company websites.
When AM Best Ratings Change
AM Best ratings are updated at least once a year if an insurer chooses to participate in a rating evaluation. AM Best monitors all participating insurance companies for any major changes to their financial strength and claims-paying abilities to their customers. Since companies are continuously monitored, an AM Best rating can change.
Changes can often happen when there are large changes to the economy. For example, many companies of all kinds have felt the impact of the COVID-19 pandemic. Changes can also happen when there are shake-ups within the company, such as a leadership change or a poor stock performance.
Even major companies can see their Financial Strength Rating (FSR) dip or Long Term Credit Issuer Rating (ICR) downgraded when they hit a rough patch. For example, in July of 2020, Globe Life saw its FSR fall from an A+ to an A. In September of 2019, the FSR for TransAmerica also went from an A+ to an A.
An established company can also see its score rise. In 2021 National Guardian Life Insurance saw its FSR rise from A- to A.
Using AM Best Ratings When Choosing an Insurance Company
You’ve probably used other types of ratings to make decisions. For example, you might have checked out the star rating and reviews on a hotel before you booked a room or read through the Kelly Blue Book information about a car you had your eye on to make sure you were getting the best deal.
AM Best ratings can help you do a similar thing before you buy a life insurance policy. They can help you find a strong company you can trust with meeting the financial obligations to your family should you pass away.
After all, your life insurance policy is something you’ll have for years. It’s a serious commitment that will outlast most other purchases you make.
Think about it this way; if you stay at a hotel for a week’s vacation and that hotel closes three years later, it won’t affect you at all. However, if you buy a 20-year term life insurance policy and the company fails 11 years later, it could cause a great deal of stress.
While all 50 states have plans set in place should a life insurance company go out of business or declare bankruptcy, would you really want to deal with that kind of stress?
A policy with a company that can’t pay its obligations isn’t a secured policy and should be avoided in the opinion of NMEQ.
AM Best does state that the purpose of its financial ratings is not a recommendation to purchase, hold or terminate any insurance policy, contract, or any other financial obligation issued by an insurer, nor does it address the suitability of any particular policy or contract for a specific purpose of purchase.
Since security is a major reason people buy life insurance in the first place, that’s a big deal. You need a policy from a company you count on to pay the death benefit out to your loved ones. That means you need a policy from a company you know will still be around for decades to come and is one of the main reasons NMEQ only offers provides that rate an A rating or higher.
A company with an AM best grade of A or better is a company you can count on to do just that. When you buy a policy from a company with an A or higher from AM Best, you can feel confident that you’ve made a good choice, and your family can feel secure knowing the policy will be there if they ever need it.
The rating on an insurance company’s website should always display their most current AM Best rating, or check out the table below where we have researched AM Best ratings from the top life insurance providers in the country.
List of Top Life Insurance Companies With High Ranking AM Best Ratings
Curious about the rating of a particular life insurance company? Or want to know which life insurance companies have the highest ratings in 2022?
NMEQ has put together the below chart listing over 50 of the top life insurance companies in the U.S., along with their AM Best rating and most recent effective rating date.
The following tables are broken down by rating, starting with life insurance companies that have earned AM Best rating of A++ and ending with companies that have earned an AM Best rating A-.
All data has been pulled from AM Best directly and is monitored whenever AM Best has made an update. If there is a certain company not listed within our list, you can reach, and we will get you an answer to their AM Best rating as long as the company has a valid rating.
Check out the chart below for some rates from top companies.
A++ Rated Life Insurance Companies
| Insurance Company | AM Best Rating | Rating Effective Date |
|---|---|---|
| Guardian | A++ (Superior) | November 12, 2020 |
| MassMutual | A++ (Superior) | June 25, 2021 |
| New York Life | A++ (Superior) | July 22, 2020 |
| Northwestern Mutual | A++ (Superior) | May 6, 2021 |
| State Farm | A++ (Superior) | August 14, 2020 |
| Thrivent | A++ (Superior) | June 23, 2021 |
| USAA | A++ (Superior) | March 11, 2021 |
A+ Rated Life Insurance Companies
| Insurance Company | AM Best Rating | Rating Effective Date |
|---|---|---|
| Aflac | A+ (Superior) | June 16, 2021 |
| Allianz | A+ (Superior) | September 10, 2020 |
| Allstate | A+ (Superior) | January 29, 2021 |
| Ameriprise | A+ (Superior) | October 16, 2020 |
| Auto Owners Life | A+ (Superior) | December 10, 2020 |
| Banner Life | A+ (Superior) | November 20, 2020 |
| Cincinnati Life | A+ (Superior) | January 27, 2021 |
| Country Financial | A+ (Superior) | June 24, 2020 |
| Hartford Life | A+ (Superior) | June 19, 2020 |
| John Hancock | A+ (Superior) | June 30, 2020 |
| Knights of Columbus | A+ (Superior) | December 3, 2020 |
| Lafayette Life | A+ (Superior) | December 11, 2020 |
| Minnesota Life | A+ (Superior) | December 18, 2020 |
| Mutual of Omaha | A+ (Superior) | January 20, 2021 |
| Nationwide | A+ (Superior) | December 17, 2020 |
| North American | A+ (Superior) | August 19, 2020 |
| Pacific Life | A+ (Superior) | May 29, 2020 |
| Penn Mutual | A+ (Superior) | March 24, 2021 |
| Primerica | A+ (Superior) | October 1, 2020 |
| Protective | A+ (Superior) | April 24, 2020 |
| Vantis Life | A+ (Superior) | March 24, 2021 |
A Rated Life Insurance Companies
| Insurance Company | AM Best Rating | Rating Effective Date |
|---|---|---|
| AAA | A (Excellent) | August 13, 2020 |
| Accendo | A (Excellent) | December 17, 2020 |
| AIG | A (Excellent) | August 19, 2020 |
| American Family | A (Excellent) | May 14, 2020 |
| Americo | A (Excellent) | October 20, 2020 |
| Ameritas | A (Excellent) | April 16, 2021 |
| ANICO | A (Excellent) | November 19, 2020 |
| Athene | A (Excellent) | March 25, 2021 |
| AXA Equitable | A (Excellent) | January 13, 2021 |
| Brighthouse | A (Excellent) | December 22, 2020 |
| Cigna | A (Excellent) | March 25, 2021 |
| CUNA Mutual | A (Excellent) | March 10, 2021 |
| Farm Bureau Life | A (Excellent) | June 23, 2020 |
| Foresters | A (Excellent) | August 5, 2020 |
| Gerber Life | A (Excellent) | December 11, 2020 |
| Global Atlantic | A (Excellent) | March 31, 2021 |
| Globe Life | A (Excellent) | July 17, 2020 |
| Great Western | A (Excellent) | March 31, 2021 |
| Jackson National | A (Excellent) | August 13, 2020 |
| National Life | A (Excellent) | May 7, 2020 |
| Ohio National Life | A (Excellent) | September 10, 2020 |
| Physicians Mutual | A (Excellent) | September 17, 2020 |
| Principal Financial | A (Excellent) | February 19, 2021 |
| Royal Neighbors | A (Excellent) | December 15, 2020 |
| SBLI | A (Excellent) | October 13, 2020 |
| Symetra | A (Excellent) | February 19, 2021 |
| Transamerica Life | A (Excellent) | October 8, 2020 |
A- Rated Life Insurance Companies
| Insurance Company | AM Best Rating | Rating Effective Date |
|---|---|---|
| American Equity | A- (Excellent) | June 26, 2020 |
| Assurity | A- (Excellent) | January 29, 2021 |
| Colonial Penn | A- (Excellent) | January 21, 2021 |
| Fidelity Life | A- (Excellent) | August 19, 2020 |
| Illinois Mutual | A- (Excellent) | October 16, 2020 |
| Lincoln Financial | A- (Excellent) | March 26, 2021 |
| Lincoln Heritage | A- (Excellent) | June 24, 2020 |
| MetLife | A- (Excellent) | December 17, 2020 |
| Motorists Life | A- (Excellent) | August 20, 2020 |
| Oxford Life | A- (Excellent) | July 30, 2020 |
| Prosperity Life | A- (Excellent) | September 3, 2020 |
| Prudential | A- (Excellent) | December 2, 2020 |
| Sagicor Life | A- (Excellent) | September 11, 2020 |
| United Home Life | A- (Excellent) | May 6, 2021 |
Other Rating Agencies that Rate Insurance Companies
AM Best is the oldest life insurance rating company in operation, but it’s not the only company that rates life insurance providers. Several other agencies also rate life insurance companies. Other major rating agencies include:
- Standard & Poor – Standard & Poor is a credit rating agency for businesses. They look at the financial stability and market competitiveness of insurance companies to assign a rating. Grades are assigned on a scale from AAA to D. Financially strong companies will earn a BBB grade or higher.
- Fitch Ratings – Fitch is part of the Hearst family of companies and was established in 1924. The company assigns grades on a scale that ranges from the AAA to D. Companies that score well are considered solid companies that will meet their financial obligations for years to come. Companies that don’t are considered weak or distressed and likely to fail.
- Moody’s – Moody’s rates life insurance companies on two different scales. The short-term rating scale looks at a company’s ability to pay its debts in the near future. The long-term rating scale looks at a company’s ability to pay its debts in the long term. Short-term grades range from Prime 1 (P1) to Not Prime (NP), and long-term grades range from AAA to C. A company with a rating of P1 and AAA is an exceptionally strong company.
- Comdex Score – A Comdex score works a little differently. Instead of a letter grade, a Comdex score is a number on a scale of 1 to 100. The scores are determined by averaging a companies scores across all the life insurance rating agencies and then comparing that average against other companies. The Comdex score represents where a company falls in comparison to other companies.
For example, a company with a Comdex Score of 93 has better ratings from all agencies than 93 percent of insurance companies. So If you’re looking at several companies with similar scores from AM Best and other agencies, their Comdex scores might be able to help you get a more accurate picture of how they all compare.
Additional Factors to Consider When Choosing a Life Insurance Company
AM Best ratings aren’t the only things to consider when you’re looking for an insurance company. A company with an A++ rating can be a great company, but that doesn’t mean it will be the right fit for you. While it’s a good idea to stick with companies that have earned at least an A- rating or better, make sure you don’t overlook other important factors, including:
The policies they offer – An A++ rating won’t do you any good if a company doesn’t offer policies that meet your needs. You need a company that can offer the type of policy you want, the benefit amount you require, and the right policy features and policy riders that work for you and your family.
If you’re looking at term policies, you also need a company that offers the term length you want. For example, most companies offer term lengths that range from 10 years up to 30 years, but recently two major providers offer a 40-year term contract length.
The other products they offer – Some life insurance companies only sell life insurance. Sometimes, that’s exactly what you need. However, some companies offer multiple types of insurance or other financial products. So if you already have a company you like and trust for your car or home insurance, you might be able to get life insurance through them.
You might even be able to get a discount for having multiple policies from the same company. This doesn’t mean it’s always the best idea or the best deal, but if you already have a few policies in place, it can’t hurt to look.
Their customer ratings – It’s always good to know what the professionals think about specific life insurance companies, but hearing from actual customers can be just as important. It’s always a good idea to check out reviews from customers.
They can tell you things that AM Best ratings won’t, such as how friendly customer service representatives are or how easy the application is to fill out. Make sure you look beyond the company’s website for reviews. A simple search of the company name will likely bring up customer reviews from neutral websites.
Underwriting benefits – There many ways for life insurance companies to remain competitive from one another. One of those ways is through underwriting. Not every life insurance company will underwrite risk the same. If you have a pre-existing health condition, it’s always best to get the help of an experienced life insurance agent who can shop your coverage with the best company that is willing to approve you at the best health classification.
The cost of coverage – The best life insurance coverage for you is always coverage you can afford. It doesn’t make sense to get a more expensive policy from an A++ policy rather than a policy that meets your needs and budget from an A+ company. That said, don’t assume you can’t afford a policy from an A++ company.
A higher rating doesn’t mean a policy is more expensive, and you might be surprised by the quotes you get. That’s why you should always get quotes from multiple companies before you buy a policy. Getting quotes from several companies can make sure you’re getting the best deal. You don’t want to be locked into a smaller policy than you actually need or to a high premium.
Final Thoughts
It’s always important to work with an insurance company you can trust. AM Best and other rating agencies can provide beneficial guidance in finding a trustworthy life insurance company. AM Best ratings are a great tool to use in your life insurance shopping.
Companies with strong AM Best ratings are companies you can be confident will be able to pay out your policy when your family needs it most. Choosing a company with a high rating can help you and your family peace of mind and security.
If you’re ready to start shopping for life insurance, you’re in the right place. At No Medical Exam Quotes, we can give you no-obligation quotes from the top no exam companies. When you choose a no-exam policy, you’ll get a great policy without taking a medical exam. You can complete the entire application process from the comfort of your home.
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