Rating Insurance Companiesor How to Find Out If Your Insurance Company is Financially Secure?
It is only natural that your first impulse is to buy the cheapest offer or the one that gives you the broadest coverage. But there is one factor that many people do not take into consideration and it is the financial security of the company you choose. It is equally important that you can rely on a timely payout in case you find yourself with a serious claim.
The government has built a safeguard to protect insurance consumers from insolvent insurance companies. Insurance companies are not eligible to file for bankruptcy under the federal bankruptcy code, but if they become insolvent, the government can step in. State-run insurance guaranty associations, which are supposed to pay claims for insolvent insurance companies, exist in each state. However, you cannot rely entirely on them to save your investment and help you out in a difficult insurance claim. Most have limits on the amount they will pay out on a single claim, and payouts are usually seriously delayed, as state courts and state insurance departments control the associations.
That is why it is very important to choose an insurance company with a good financial rating in order to be confident that your claim will be dealt with in timely manner. There are many rating companies, which provide this valuable information. Most of them use some form of a "report card" style rating method (A-F), with many using pluses and minuses (A+ or A-), and double or triple letters (AA or AAA+) to give as specific a rating as possible. The ratings reflect the financial security of both the individual insurance company and sometimes the holding company it is a part of, and are based on financial information the companies are required to provide to the government, as well as information provided directly to the rating companies.
Here you will find the ratings of two of the most popular companies: