Life insurance company ratings are financial strength grades assigned by independent agencies like AM Best, Fitch, Moody’s, and Standard & Poor’s. These ratings measure an insurer’s ability to pay claims and meet long-term obligations to policyholders. When shopping for life insurance, look for companies rated A or higher by AM Best, or AA or higher by S&P and Fitch.
Your life insurance policy could be in force for 20, 30, or even 50 years. That’s a long time to trust a company with one of your most important financial promises. So how do you know they’ll actually be there when your family needs them?
That’s where life insurance company ratings come in. These ratings are like report cards for insurance companies. Independent agencies review each insurer’s finances and assign a grade based on their ability to pay claims. Understanding these ratings can help you pick a company you can count on for the long haul.
In this guide, we’ll break down the four major rating agencies, explain what their grades actually mean, and show you how to use them when choosing a life insurance provider.
What Are Life Insurance Company Financial Ratings?
Life insurance company ratings are opinions issued by independent agencies about an insurer’s financial strength. They measure a company’s ability to meet its obligations to policyholders, including paying out death benefits and honoring policy terms.
These ratings look at things like how much money the company has in reserves, how well it manages its investments, and how much debt it carries. The agencies also review the company’s operating performance and business strategy.
Ratings aren’t a guarantee that a company won’t ever have financial trouble. But they do give you a reliable snapshot of where things stand right now and where they’re likely headed.
Why Do Life Insurance Ratings Matter?
Insurance companies are actually investors. The premiums you pay get reinvested so the company can afford to pay out claims while staying profitable. A company’s financial rating tells you how well it manages that money.
This matters more with life insurance than almost any other type of coverage. With auto or home insurance, you can switch providers fairly easily. Life insurance is different. If you buy a term life insurance or final expense policy today, you’re counting on that company to fulfill its promise years or even decades from now.
If a company’s finances weaken over time, it could struggle to pay claims. In rare cases, insurers have even gone into liquidation. Checking ratings before you buy is one of the simplest ways to protect your family from that risk.
The Four Major Rating Agencies
Four independent agencies rate the financial strength of life insurance companies. Each uses its own scale and methodology, so an “A+” from one agency doesn’t mean the same thing as an “A+” from another. A fifth agency, Kroll Bond Rating Agency (KBRA), also rates some insurers but is less commonly referenced for consumer life insurance decisions. Here’s what you need to know about each of the four major agencies.
AM Best
AM Best is the gold standard for insurance ratings. Founded in 1899, it’s the only major rating agency focused exclusively on the insurance industry. AM Best reviews over 16,000 insurance companies worldwide.
AM Best uses a scale from A++ (Superior) down to D (Poor), with additional designations for companies under regulatory supervision (E), in liquidation (F), or with a suspended rating (S). The agency evaluates balance sheet strength, operating performance, and business profile when assigning its grades.
For life insurance, we recommend choosing a company rated A- (Excellent) or higher by AM Best.
AM Best Rating Scale:
- A++, A+ = Superior
- A, A- = Excellent
- B++, B+ = Good
- B, B- = Fair
- C++, C+ = Marginal
- C, C- = Weak
- D = Poor
- E = Under regulatory supervision
- F = In liquidation
- S = Rating suspended
- NR = Not rated
Standard & Poor’s (S&P)
S&P has been rating financial institutions since 1860. Unlike AM Best, S&P rates companies across all industries, not just insurance. Their insurance financial strength ratings use a scale from AAA (Extremely Strong) down to D (Default).
S&P’s scale has 19 categories, so it provides more granular distinctions between companies. An A+ from S&P is their fifth-highest rating, which is very different from AM Best’s A+ (their second-highest). When comparing across agencies, an AM Best A- is roughly comparable to an S&P BBB rating.
S&P Rating Scale (Top Tiers):
- AAA = Extremely Strong
- AA+, AA, AA- = Very Strong
- A+, A, A- = Strong
- BBB+, BBB, BBB- = Good (lowest “secure” tier)
- BB+ and below = Vulnerable/Speculative
Moody’s
Moody’s Investors Service has been in the ratings business since 1909. Moody’s uses a different format than the other agencies, combining capital and lowercase letters with numbers. Their scale runs from Aaa (Exceptional) down to C.
The number modifiers (1, 2, 3) work like plus and minus signs. So Aa1 is the strongest within the “Excellent” tier, while Aa3 is the weakest. Moody’s doesn’t have a traditional A+ rating at all, which can confuse people comparing across agencies.
Moody’s Rating Scale (Top Tiers):
- Aaa = Exceptional
- Aa1, Aa2, Aa3 = Excellent
- A1, A2, A3 = Good
- Baa1, Baa2, Baa3 = Adequate (lowest investment grade)
- Ba1 and below = Speculative
Fitch Ratings
Fitch was founded in 1913 and is the smallest of the “Big Three” credit rating agencies (along with S&P and Moody’s). Fitch is credited with introducing the AAA-to-D rating scale that S&P later adopted.
Fitch’s insurance financial strength ratings use 24 categories, giving them the most detailed scale of the four agencies. Like S&P, their ratings above BBB- are considered “secure,” while anything below is “vulnerable.” Fitch often serves as a useful reference point when AM Best and the other agencies disagree on a company’s rating.
Fitch Rating Scale (Top Tiers):
- AAA = Exceptionally Strong
- AA+, AA, AA- = Very Strong
- A+, A, A- = Strong
- BBB+, BBB, BBB- = Good (lowest “secure” tier)
- BB+ and below = Vulnerable
How the Rating Scales Compare
One of the biggest sources of confusion is that the same letter grade can mean very different things depending on the agency. For example, an A+ from AM Best is the second-highest of its 15 categories, while an A+ from S&P is the fifth-highest out of 19 categories. This table shows how the top ratings line up across all four agencies.
| Rank | AM Best | S&P | Moody’s | Fitch |
|---|---|---|---|---|
| 1 (Highest) | A++ (Superior) | AAA (Extremely Strong) | Aaa (Exceptional) | AAA (Exceptionally Strong) |
| 2 | A+ (Superior) | AA+ | Aa1 | AA+ |
| 3 | A (Excellent) | AA | Aa2 | AA |
| 4 | A- (Excellent) | AA- | Aa3 | AA- |
| 5 | B++ (Good) | A+ (Strong) | A1 (Good) | A+ (Strong) |
| 6 | B+ (Good) | A (Strong) | A2 (Good) | A (Strong) |
The key takeaway: always check which agency issued a rating before drawing conclusions. An AM Best A- (Excellent, 4th highest) is not the same as an S&P A- (Strong, 7th highest).
What Is the Comdex Score?
With four different agencies using four different scales, comparing ratings can feel overwhelming. The Comdex score simplifies this.
The Comdex is a composite ranking that takes a company’s ratings from all four agencies and converts them into a single number on a scale of 1 to 100. It’s not a rating itself. It’s a percentile ranking that shows where a company stands compared to all other rated insurers.
For example, a Comdex score of 90 means the company ranks higher than 90% of all rated insurance companies. A score of 75 means it outperforms 75% of its peers.
To qualify for a Comdex score, a company must be rated by at least two of the four major agencies. The score is provided through the VitalSigns platform by Zinnia and is updated every few weeks.
When evaluating life insurance companies, a Comdex score of 80 or above generally indicates strong financial health. Your insurance agent can often pull a Comdex report for any company you’re considering.
What Rating Should You Look For?
As a general rule, stick with life insurance companies that fall in the “secure” range across the major agencies. Here’s a quick guide:
- AM Best: A- or higher (Excellent to Superior)
- S&P: A or higher (Strong to Extremely Strong)
- Moody’s: A2 or higher (Good to Exceptional)
- Fitch: A or higher (Strong to Exceptionally Strong)
- Comdex: 80 or above
You don’t need a company with perfect ratings across the board. But you do want to see consistent strength from at least two or three agencies. If a company has strong ratings from AM Best but weak marks from S&P, that’s worth investigating further.
It’s also smart to check the rating outlook. A company with an A rating but a “negative” outlook may be headed for a downgrade. Look for companies with “stable” or “positive” outlooks for the most peace of mind.
How to Check a Life Insurance Company’s Rating
Checking ratings is free and takes just a few minutes. Here’s where to look:
- AM Best: Visit ambest.com and use their Company Search tool
- S&P: Search at spglobal.com/ratings (free registration required)
- Moody’s: Visit moodys.com and search under Insurance
- Fitch: Go to fitchratings.com and search by company name
Not every insurer will be rated by all four agencies. That’s normal and not a cause for concern, especially if the company has strong ratings from two or three agencies. For a helpful overview of all the rating agencies in one place, the Insurance Information Institute provides a comprehensive guide with contact information for each agency.
You can also ask your insurance agent for a Comdex report, which combines all available ratings into one easy-to-read score. At Best Life Quote, we work with over 30 A-rated life insurance companies and can help you compare options based on financial strength and your specific needs.
Frequently Asked Questions
What is the best rating a life insurance company can get?
The highest possible rating depends on the agency. AM Best’s top grade is A++ (Superior). S&P and Fitch both use AAA as their highest mark, while Moody’s top rating is Aaa. Any of these ratings indicate exceptional financial strength.
Can a life insurance company go out of business?
It’s rare, but it can happen. Insurance companies are regulated at the state level, and each state has a guaranty association that provides limited protection if an insurer becomes insolvent. Checking financial ratings before you buy is the best way to reduce this risk.
Are AM Best ratings more important than S&P or Moody’s?
AM Best is considered the gold standard for insurance ratings because it focuses exclusively on the insurance industry. S&P, Moody’s, and Fitch rate companies across all industries. For the most complete picture, check ratings from at least two agencies or look at the Comdex score.
How often do insurance company ratings change?
Rating agencies monitor companies continuously and can update ratings at any time. Most companies are formally reviewed at least once a year. Major financial events can trigger an immediate review and rating change.
What is a Comdex score?
The Comdex is a composite ranking on a 1-to-100 scale that combines ratings from AM Best, S&P, Moody’s, and Fitch into a single percentile score. A score of 85 means the company ranks higher than 85% of all rated insurers. It’s one of the easiest ways to compare financial strength across companies.
Does a high rating mean the company has the cheapest rates?
Not necessarily. Financial ratings measure a company’s ability to pay claims, not its pricing. Some highly rated companies offer very competitive rates, while others may charge more. It’s important to compare both ratings and quotes before you decide.
Key Takeaways
- Life insurance company ratings measure an insurer’s financial strength and ability to pay claims over the long term.
- Four major agencies rate insurers: AM Best, S&P, Moody’s, and Fitch. Each uses a different scale, so the same letter grade can mean different things.
- Look for companies rated A- or higher by AM Best, or A or higher by S&P and Fitch.
- The Comdex score combines all agency ratings into a single 1-to-100 percentile ranking, making comparisons much easier.
- Always check ratings from at least two agencies before choosing a life insurance company.
Ready to find a top-rated life insurance company that fits your budget? Get a free quote from Best Life Quote today, or call us at 800-712-8519 to speak with one of our experienced agents.
