Industry Ratings
One of the key steps in purchasing any insurance policy is to evaluate the financial strength of the insurance company. The risk is that the company may default. In other words, not be able to pay benefits because they do not have the capital necessary to do so. The following chart illustrates the different companies that rate life insurance companies and the ratings they give.

A.M. Best Standard & Poors Moody\'s D&B Weiss
A++ AAA Aaa AAA A+
A+ AA+ Aa1 AA+ A
A AA Aa2 AA A-
A- AA- Aa3 AA- B+
B++ A+ A1 A+ B
B+ A A2 A B-
B A- A3 A- C+
B- BBB+ Baa1 BBB+ C
C++ BBB Baa2 BBB C-
C+ BBB- Baa3 BBB- D+
C BB+ Ba1 BB+ D
C- BB Ba2 BB D-
D BB- Ba3 BB- E+
E B+ B1 B+ E
F B B2 B E-
B- B3 B- F
CCC Caa CCC+
R Ca CCC
C CCC-
DD


Again, the rating system measures the financial strength of the company, the higher the rating the better.

Underwriting
This is a process used by insurance companies to evaluate applicants. The insurance company wants to be able to determine an applicant's exposure to risk. The goal is to make sure that the applicant's risk exposure is equal to the risk exposure the company has set its premium rates to. In other words, the companies use this process to minimize there own risk taken by issuing a policy. Insurance companies use several sources for underwriting an application. They can include...
  • The agent
  • The application
  • Bureaus and associations
  • Physical exam
  • Previous medical records
  • Smoker versus non-smoker

Insurance companies will base whether or not the application is accepted or rejected, the type of policy available to the applicant, and the premiums it charges on this process.
Annuities

Related Articles
  1. Investing

    When To Trust Bond Rating Agencies

    Despite investor distrust, rating agencies can be helpful. Just be sure you use these ratings as a starting point.
  2. Investing

    What Do AA+ And AAA Credit Ratings Mean?

    Moody's just downgraded China's credit rating. So, what does it matter if you hold a AAA or AA+ rating?
  3. Financial Advisor

    Top Schwab Funds for Retirement (SWDRX, SWERX)

    These Schwab funds are strategically designed and have performed well on a historical basis, meaning they're solid options for retirement.
  4. Investing

    The 5 Best Muni Bond Funds

    These five funds are some of the best bets for muni bonds for those seeking diversification and tax benefits.
  5. Investing

    What Is the Value of a AAA Credit Rating? (XOM)

    Following the Exxon credit rating downgrade, investor's are asking is there any value in even having a AAA credit rating?
  6. Small Business

    What's a Transfer Price?

    A transfer price is what one unit of a business charges another unit of the same business for a good or service. The transfer price is usually close to the prevailing market rate when different ...
  7. Investing

    What Is A Corporate Credit Rating?

    Is the bond you're buying investment grade, or just junk? Find out how to check the score.
  8. Small Business

    The Better Business Bureau's Tool Belt For Saving Cash

    The BBB is one resource to help you connect with the best product/service providers in your area.
  9. Investing

    Google Stock: A Tale of Two Share Classes (GOOG, GOOGL)

    Google stock comes in two different flavors with different rights for shareholders.
  10. Insurance

    Medicare 101: Do You Need All 4 Parts?

    Medicare is the United States’ health insurance program for those over age 65. Medicare has four parts, but you might not need them all.
Frequently Asked Questions
  1. When are Beneficiaries of a Will Notified?

    Learn when the beneficiaries of a will must be notified, and understand how this requirement varies depending on whether ...
  2. Why Does Larry Page Pay Himself a $1 Salary?

    Google co-founder Larry Page continues to take an annual salary of only $1 as chief executive officer.
  3. What is Common Stock and Preferred Stock?

    Learn about the differences between common and preferred shares. Explore situations where preferred shares have more favorable ...
  4. Can CareCredit be Used for Family Members?

    Learn more about the available options that CareCredit offers to pay for out-of-pocket medical procedures with little to ...
Trading Center