Nearly every “best life insurance companies” list you will read leans on ratings. Very few explain what those ratings actually measure, how current they are, or where to look them up yourself. That matters, because a rating is the closest thing you have to an independent opinion on whether a company will still be able to pay a claim in thirty years — and because the ratings quoted in articles go stale quietly.
This guide explains what the grades mean, what they deliberately do not cover, and how to check any insurer in about five minutes using free public sources.
Life Coverage Calculator is an independent publisher, not an insurance agency, broker or carrier. This guide is written by Ryan Hearn, a licensed insurance producer in California (CA licence #0L14758). It is general information to help you evaluate companies, not a recommendation to buy any specific policy.
What a financial strength rating actually measures
A financial strength rating is an opinion about one narrow question: can this insurer meet its obligations to policyholders? It is a judgment about reserves, capital, and the durability of the business — not a review of the product you are buying.
Four agencies rate US life insurers: AM Best, Standard & Poor’s, Moody’s and Fitch. AM Best specializes in insurance and is the one most often quoted, though large insurers usually carry several. The agencies are paid by the companies they rate, which is worth knowing, though their methodologies are published and their track record on insurer solvency is reasonable.
The rating scales, roughly aligned
The scales do not map onto each other perfectly, but the tiers line up closely enough to compare. Term life is a long-dated promise, so most buyers sensibly stay in the top two tiers.
| Tier | AM Best | S&P | Moody’s | Fitch |
|---|---|---|---|---|
| Strongest | A++, A+ | AAA, AA | Aaa, Aa | AAA, AA |
| Strong | A, A− | A | A | A |
| Good / adequate | B++, B+ | BBB | Baa | BBB |
| Speculative | B and below | BB and below | Ba and below | BB and below |
A practical rule: for a twenty or thirty year term policy, treat the top two tiers as the shortlist. Below that you are accepting a solvency risk you are not being paid to take, because a lower-rated insurer’s term rates are rarely low enough to justify it.
What ratings do not tell you
This is where most articles stop, and it is the part that costs people money. A financial strength rating says nothing about:
- Price. Two A+ rated insurers can quote the same person premiums that differ by fifty percent or more, because they underwrite differently.
- Underwriting appetite. Companies specialize. One is generous about controlled blood pressure; another is better on a past cancer diagnosis; a third is unusually strict about recreational aviation. A top rating tells you nothing about how you will be classified.
- Service and claims handling. How an insurer treats a beneficiary during a claim is a separate question, measured by complaint data and customer satisfaction studies.
- Policy features. Conversion rights, riders and term lengths vary enormously between equally well-rated companies, and conversion options in particular are worth real money later.
The complaint index, which often matters more
The National Association of Insurance Commissioners publishes a complaint index for every licensed insurer. It is scaled so that 1.00 is the expected number of complaints for a company of that size. Below 1.00 means fewer complaints than its market share would predict; above 1.00 means more.
This is arguably more useful to a buyer than a financial strength rating, because nearly every major term insurer is financially strong, while complaint behavior varies a lot. A company at 0.3 and a company at 2.5 can hold the same A+ grade.
Read it with some care. Complaint counts are small for smaller insurers, so a single year can swing the index; look at a few years, and at whether complaints cluster around claims handling rather than billing.
How to check any insurer yourself, in about five minutes
- Get the exact legal entity name. This is the step people skip. Policies are issued by a specific subsidiary, and the brand on the website is often not the entity on the contract. The issuing company is named on the policy illustration or application.
- Look up the financial strength rating at the AM Best Credit Rating Center. Free registration, and it gives you the current grade plus the outlook, which tells you the direction of travel.
- Check the complaint index at the NAIC Consumer Information Source, for the same legal entity.
- Confirm the company is licensed in your state through your state insurance department. An insurer not licensed where you live cannot issue you a policy, and your department is also where a complaint would go.
Do this for the company you are actually about to buy from, not the parent brand, and do it at the point of purchase rather than trusting a figure quoted in an article. Ratings change, and published lists are rarely updated when they do.
What happens if an insurer fails anyway
Every state operates a guaranty association that steps in when a licensed insurer becomes insolvent, and membership is a condition of doing business there. Coverage limits vary by state but commonly reach around $300,000 in death benefit.
You may never have heard of this, and there is a reason: in most states an agent is legally prohibited from using guaranty association coverage as an inducement to buy. It is a genuine backstop, not a selling point, and it is capped — which is exactly why the rating still matters if your coverage runs well above the limit.
Using ratings when you compare companies
Ratings are a filter, not a ranking. The sensible order is to use financial strength to build a shortlist, then decide between the survivors on the things ratings ignore — price for your health profile, underwriting fit, conversion rights and term length.
➡️ See how we rate and compare term life insurance companies, including the criteria behind each pick.
➡️ Not sure how much coverage you need first? Use the free life insurance coverage calculator.
Frequently asked questions
What is a good AM Best rating for life insurance?
For a term policy you expect to hold for decades, most buyers stay at A− or better, and the top tiers are A++ and A+. Below the A range you are taking on solvency risk that term pricing rarely compensates you for.
Does a higher rating mean a more expensive policy?
No. There is no reliable relationship between financial strength and price. Several of the most competitively priced term insurers carry top-tier ratings, because pricing is driven by underwriting and distribution costs rather than by the rating itself.
How often do these ratings change?
Agencies review at least annually and can act sooner. Changes are usually a single notch, and the published outlook — positive, stable or negative — signals the likely direction. Check the current rating rather than a figure quoted in an article, including this one.
Is the complaint index more important than the rating?
They answer different questions. The rating asks whether the company can pay; the complaint index hints at how it behaves while doing so. Since almost every major term insurer is financially strong, the complaint index is often the more discriminating of the two.