Whether they’re shopping for movies, gadgets, or cars, most consumers rely on ratings to help them decide what’s worth spending their hard-earned cash on. Buying life insurance coverage is no different. In fact, given how important choosing the right insurance policy and provider is to safeguarding your beneficiaries’ financial stability, it’s no wonder that multiple ratings agencies exist to perform an analysis and render their opinion of a life insurance company’s financial strength and claims-paying ability.
These third-party ratings agencies are evaluating life insurance carriers on the nuts and bolts of their financial strength. Using varying degrees of analytical rigor, ratings agencies evaluate how well-funded an insurance carrier is, how much risk it carries, and its operating performance. Each ratings agency has a different formula.
Ratings represent the opinion of the rating agency of the financial strength and ability to meet contractual obligations of the company being rated, based on the rating agency’s independent analysis. A rating is not a guarantee of financial strength, but it can be considered an indicator.
But why should an insurance company’s financial particulars matter to you, when you’re already comparing providers in terms of insurance policy options, lower vs. higher premiums, or how pre-existing conditions affect coverage? The answer is simple: If a life insurer doesn’t seem likely to meet its ongoing financial obligations, or if it may not have the financial stability to pay out a death benefit when your beneficiaries need it most—whatever their age, even if it’s 30 years from now!—then what peace of mind can they really offer?
Other third-party groups provide ratings, scores or reviews for life insurers, too. However, they’re not financial strength ratings — they’re usually based primarily on consumers’ experiences or complaints. You can refer to both kinds of ratings when determining which life insurance company is right for you.
This article will focus on rating the financial health of some well-known companies offering life insurance coverage. There are several rating agencies out there – not to mention independent customer review sites, – but four of them are most frequently touted to represent the quality of life insurance companies.
Each of the four – A.M. Best, Fitch, Moody’s and Standard & Poor’s – has its own standards and grading scale for rating insurance companies.
- A.M. Best rates companies on a scale of A++ down to F
- Fitch rates companies from AAA to D
- Moody’s uses a scale of Aaa to C
- Standard & Poor’s rates companies from AAA to D
It’s important to get familiar with the rating agency whose grades you’re considering. Otherwise, the score could give you a false sense of security. For example, A+ is A.M. Best’s second-highest rating, but an A+ is Fitch’s fifth-highest rating.
The ratings organizations themselves may make you pay a fee for the privilege of seeing their ratings. But typically, a life insurance company will list its ratings from these agencies on the company’s website. Either way, we’re happy to do the work for you and offer a starter list of ratings below, which we’ve listed them in alphabetical order, just to show we’re not playing favorites.
AIG
American International Group, Inc. reached the distinguished age of 100 this year. The company started to provide coverage in 1919 when founder Cornelius Vander Starr hired his first insurance agent in Shanghai, of all places. (Ratings gathered in March 2019.)
- A.M. Best: A
- Fitch: A+
- Moody’s: A2
- Standard & Poor’s (S&P): A+
John Hancock
Named after the prominent American revolutionary patriot, this insurer was actually acquired in 2004 by Canadian firm Manulife (which also has health, dental, and disability insurance coverage on offer). (Ratings gathered in February 2019.)
- A.M. Best: A+
- Fitch: AA-
- Moody’s: A1
- Standard & Poor’s (S&P): AA-
MassMutual
MassMutual is Haven Life’s parent company (not that we’re playing favorites). During the Great Depression, MassMutual allowed customers to borrow cash against their insurance policies, helping them maintain financial health in hard times. (Ratings gathered in February 2019.)
- A.M. Best: A++
- Fitch: AA+
- Moody’s: Aa2
- Standard & Poor’s (S&P): AA+
MetLife
MetLife doesn’t pay Snoopy to be its spokes-dog anymore, but it will still offer you a term life insurance policy. (Ratings gathered in February 2019.)
- A.M. Best: A+
- Fitch: AA-
- Moody’s: Aa3
- Standard & Poor’s (S&P): AA-
Mutual of Omaha
The steady cash generated by Mutual of Omaha’s nationwide insurance business allowed the company to financially support the beloved TV nature show “Wild Kingdom” for decades. (Ratings gathered in March 2019.)
- A.M. Best: A+
- Fitch: not listed
- Moody’s: A1
- Standard & Poor’s (S&P): AA-
Nationwide
This company actually started out providing coverage for expenses from auto accidents. Now they offer an insurance policy for just about anything. (Ratings gathered in May 2018.)
- A.M. Best: A+
- Fitch: not listed
- Moody’s: A1
- Standard & Poor’s (S&P): A+
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Northwestern Mutual
This insurer got off to a rocky start when, in 1859, the company’s president had to take out personal loans in order to pay out the death benefit they owed to two insurance policy holders who perished in a train accident. They’ve gotten much sturdier financially in the past 160 years. (Ratings gathered in June 2018.)
- A.M. Best: A++
- Fitch: AAA
- Moody’s: Aaa
- Standard & Poor’s (S&P): AA+
Prudential
At its founding in 1875, this company had the endearing name “The Widows and Orphans Friendly Society,” and its only product was an insurance policy designed to pay for burial expenses. Nowadays, Prudential has enough cash to pay $3 trillion worth of death benefits it’s responsible for (just not all at once). Financially speaking, they’re clearly doing something right. (Ratings gathered in February 2019.)
- A.M. Best: A+
- Fitch: AA-
- Moody’s: A1
- Standard & Poor’s (S&P): AA-
Remember, this is just an introduction to some ratings of major companies offering life insurance coverage. And these ratings are just one factor to take into account when deciding what to pay (and whom) for a term life insurance policy.
To determine which insurance company is right for you, you’ll want to consider everything from what products they offer to what the experience itself may be like. Price of a policy is also a great determining factor because, of course, you want to have affordable coverage.
You can also consult groups like the Better Business Bureau (BBB), whose aim is to promote ethical business practices, and assigns ratings based on factors like the business’s complaint history, its time in business, and the quality of its service.
Or sites like Nerdwallet, which have done their own independent research into what companies get the most (and most concerning complaints).
Armed with this information, you’ll be in a better position to make an informed decision when choosing the life insurance company to buy your policy from.
Fine print
Please note that the ratings shown here are from each respective company’s website, and are as of the dates noted at the time of this article’s publication (August 2018). Rating information in this article is limited and intended for reference only. Ratings are subject to change. Please refer to each company’s website for full information on each Company’s ratings and for the most current ratings.
Financial Strength Ratings for Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111, and its subsidiaries, C.M. Life Insurance Co. and MML Bay State Life Insurance Co. (Enfield, CT 06082) are: A.M. Best Company: A++ (Superior; top category of 15); Fitch Ratings: AA+ (Very Strong; second category of 21); Moody’s Investors Service: Aa2 (Excellent; third category of 21); Standard & Poor’s: AA+ (Very Strong, second category of 21). Ratings are as of August 1, 2018 and are subject to change. These ratings do not apply to Haven Life Insurance Agency, LLC.
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