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Why You Need to Know Your Insurance Company Rating

Why you should care about your insurance company rating
Even if you’re not filing a claim, using an insurance company with a lower financial rating could hurt you.

Before purchasing a policy, you’ll want to make sure that the insurance company you choose will be able to pay you after a claim is approved. Insurance company ratings are expert assessments of a provider’s financial strength. You can use them to decide whether or not you trust a certain company to cover damage to your property according to your policy.

All insurance companies receive ratings from independent agencies that estimate their ability to pay out claims under significant financial strain, like after a flood or hurricane.

Your insurance partner monitors these ratings closely, watching for dips that indicate any risks you face if you renew your policy or want to secure financing. It’s not uncommon for lending institutions to require homeowners and building owners to purchase a policy with an A-rated insurance company.

Reading & Evaluating Insurance Company Ratings

Insurance company ratings can vary widely from agency to agency. Each independent rating agency uses its own rating scale and criteria. An A+ from one agency isn’t the same as an A+ from another—if the agency even uses an A+ rating.

These ratings are opinions—important ones, because they’re based on recent financial data gathered by professionals—but still opinions. When you’re shopping for insurance, consider ratings as just one of the factors that will inform your final decision.

Your insurance partner can help you evaluate ratings and provide insight on how much weight you should give them in light of your specific policy needs and goals.

Financial Rating Agencies

Many agencies assess the financial stability of insurance carriers. The four leaders in this space are as follows:

All four publish their ratings online, free of charge, but some sites require registration.

Many consider A.M. Best the standard. Founded in 1899, it’s the oldest of the pack, and it was created with the specific mission of reporting on the financial stability of insurers and the insurance industry. Even today, the company maintains an exclusive focus on the insurance industry. The other services also rate companies in other sectors.

Check the Rating of Your Insurance Provider Annually

As mentioned above, the ratings vary from agency to agency, as do the rating scales. Go to the source, rather than trust the insurance companies themselves.

Your insurance provider’s ratings can change anytime, so it’s a good idea to check your provider’s ratings from two or more agencies on an annual basis. Of course, you can also let your insurance broker keep you up to date.


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