Rating A Life Insurance Provider

Reader’s Question:

How can I check a life insurance company’s financial standing? And if ever that my life insurance provider here in California goes bankrupt, what will happen to my policy?

Irene

Anaheim, CA

You brought up some very interesting questions there! For your first question, you can refer to many companies and rating agencies on the web to run a search on the financial strength of companies falling under a particular industry. We recommend the following: J.D Power, A.M Best Co., Moody’s Investor Services, Weiss Research, Standard & Poor and Duff & Phelps.

Each of the said agency/company will have it’s own way or scheme of rating a particular company so it is best to understand first how they rated (which is not going to be a problem since they will make sure that people will understand the criteria used for the ratings). You should be able to check the financial rating of the particular life insurance carrier that you are interested to in. You can also use life insurance portals like this website to run a life insurance quote to determine which providers are offering the cheapest life insurance rates.

If you had the bad luck of choosing an insurance company that goes out of business in the future (which is rare), other life insurance carriers that are based there in California would have the responsibility of bailing-out, or buying-out the failing company (This practice is also done in all other states). The state’s insurance regulators would do their best to make sure that the affected policyholders would not lose their money. But usually, a larger life insurance corporation would take over on it’s own initiative.