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

    Mountain of Debt: Sovereign Borrowing Costs Rise

    Treasury Building: the U.S., China, Germany, Brazil and other nations face $7.7 trillion in maturing debt as borrowing costs rise
  5. 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.
  6. 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?
  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

    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 ...
  9. 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.
  10. Financial Advisor

    All About Impaired Risk Annuites and Insurance

    What are impaired risk insurance products and understanding life insurance rate classes, table ratings and flat extra premiums.
Frequently Asked Questions
  1. I'm about to retire. If I pay off my mortgage with after-tax money I have saved, I can save 6.5%. Should I do this?

    Only you and your financial advisor, family, accountant, etc. can answer the "should I?" question because there are many ...
  2. My wife and I both converted our Traditional IRAs to Roth IRAs over a decade ago and have invested the maximum allowed each year since. We're buying our first home soon. Do we both qualify for one-time, tax-free, $10,000 distributions?

    You and your spouse each qualify for a penalty-free distribution of up to $10,000 for the purchase, acquisition or construction ...
  3. Is a Thrift Savings Plan (TSP) a qualified retirement plan?

    Take advantage of the government's retirement plan for employees with the Thrift Savings Plan. As with a 401(k), contributions ...
  4. Who manages the assets in a Roth 401(k) account?

    Learn how to personally manage the assets in your Roth 401(k) plan and determine the best options available to help meet ...
Trading Center