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?

    Whether you held a AAA or AA+ rating, the difference didn't seem to matter to Mr. Market on Monday.
  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. 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 ...
  6. Investing

    Junk Bonds: Does High Yield Equal Extreme Risk?

    High-yield bonds present a lot of risks but do they outweigh the rewards? Here are some ETFs to consider, with caution.
  7. 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?
  8. 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.
  9. Personal Finance

    Quiz: How Do Your Finances Measure Up?

    We look at average American debt, credit scores and much more so you can find out how you stack up.
  10. 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.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center