How to Measure Life Insurance Solvency
The long term strength and liquidity of a life insurance company is a crucial consideration when purchasing life insurance. A life insurance company sells nothing more than a promise, and a policy is no better than the ability of a company to keep its promises, often decades into the future. Because life insurance gets more expensive with age, and because you must generally medically qualify for good life insurance plans, you frequently cannot undo deciding on a poor company. If you choose a company and it goes bankrupt, and your health has declined since you bought the policy, you may not be able to get insurance elsewhere.
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Instructions
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Decide on a few competing companies.
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Log on to the Insure.com ratings look-up tool provided in the Resources section on this page.
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Enter the names of the companies you are considering.
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View the ratings given to your selected companies for strength, stability and liquidity by Standard & Poor's. They assign grades to life insurance companies, with AAA being the highest grade available, CC means "very weak" and "R" meaning the company is currently undergoing regulatory action. Many times, the higher the rating, the higher the premiums in the short run.
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Download and read the annual report for the insurance company or companies you are considering.
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Tips & Warnings
Generally, states maintain pools of capital to guarantee limited amounts of life insurance in case the insurance company should fail. This amount varies by state, but is typically limited to just a few hundred thousand dollars.
Some dividend-paying life insurance companies can provide a lower cost of insurance over a lifetime than non-dividend paying companies with lower first-year premiums.
Some errors and omission policies do not cover agents who sell life insurance rated BBB or below. To protect yourself, look for life insurance companies rated A, AA or AAA
