How We Rate Life Insurance Companies

Why the company matters more with life insurance

Life insurance is a promise the company may not have to keep for decades. An indexed universal life policy (IUL) bought at 45 can stay in force past 90. Over that time the company decides, within the limits of the contract, what caps and participation rates to credit, what it charges for the insurance itself and how quickly it answers your calls. The policy form sets the outer limits. The company's behavior decides where inside those limits you actually land.

That is why our company reviews look at two different questions. First, will this company be able to pay? That is financial strength. Second, how has it treated the people who already own its policies? That is track record. A company can score well on the first and poorly on the second.

What a financial strength rating measures

A financial strength rating is an independent agency's opinion of an insurer's ability to pay its policy and contract obligations. Agencies look at capital, the quality of the investments behind the reserves, profitability, management and how the company would hold up under stress.

It is a rating of the company, not of any policy. It also applies to one specific legal entity. Many insurance groups own several life companies, and each can carry its own rating. We always show the rating of the company that actually issues the policy, and we say so when it differs from the parent group's headline rating.

The four agencies and what their grades mean

We show every agency that rates the company, side by side, and we lead with AM Best because it specializes in rating insurance companies.

Plus and minus signs, or the numbers 1 to 3 at Moody's, mark steps within each grade. So A+ at S&P sits just above A, and A1 at Moody's sits just above A2.

AM Best's own definitions describe financial strength at B (Fair) and below as vulnerable to adverse changes in underwriting and economic conditions. Fitch calls BBB its lowest "secure" category and treats BB and below as "vulnerable." The labels matter less than the gap: the difference between A+ and A- is small, while the difference between A- and B+ is a real step down.

Agencies also publish an outlook (positive, stable or negative) and can place a rating under review. A negative outlook is an early warning, and we report it next to the grade.

How we read the ratings

• We show the agencies' own grades, unchanged. We never average them, convert them into a number or blend them into a score of our own.
• We date every rating. Each review notes the month the agency last affirmed or changed it.
• We note disagreement. When two agencies see a company differently, we say so and explain what each one emphasized, where the agency explains it.
• We note thin coverage. A company rated by only one agency is not necessarily weaker, but a second independent opinion adds confidence, so we point it out.

For a policy you may hold for most of your life, we think A- (Excellent) or better from AM Best is a sensible floor, and many buyers prefer A or higher. Below A-, we still review the company, but we explain the extra risk plainly and compare it with stronger alternatives.

Complaint record

The NAIC, the national organization of state insurance regulators, publishes closed consumer complaint data for every licensed insurer through its Consumer Insurance Search tool. Its complaint index compares a company's share of complaints with its share of premium for a given line of insurance. An index of 1.00 means the two shares match. Above 1.00 means more complaints than you would expect for the company's size; below 1.00 means fewer.

We look at individual life insurance complaints specifically, over the three years the NAIC shows, and we read the reasons (claim handling, delays, policyholder service) rather than just the number. Two cautions shape how we use it:

• Small companies swing. A company with little premium can move well above 1.00 on a handful of complaints. We say when the count is small.
• The market moves too. The NAIC notes that an index can change because the whole market's complaints or premium changed, not only the company's. One bad year is not a trend; three are.

How the company treats existing policyholders

This is the part of a life insurance company review most buyers never see, and it is the part we weigh most after financial strength. An IUL has several non-guaranteed elements: parts of the policy the company can change after you buy it, within the limits printed in the contract. We check how each company has actually used that freedom.

• Cap and participation rate history on in-force policies. Companies can lower the caps and participation rates on policies already in force, down to the guaranteed minimums in the contract. Some keep renewal rates close to what new buyers get. Others offer attractive rates to new buyers and let older blocks drift lower. Where the carrier publishes renewal rate history, or we can confirm it from in-force policy statements and rate notices, we show it. Where we cannot verify it, we say that, rather than guess.
• Cost of insurance increases. Universal life policies let the company raise the monthly cost of insurance charge up to a guaranteed maximum. Since the mid-2010s, several insurers have raised these charges on existing universal life policies, and some of those increases ended up in court. We report any increase a company has made on existing universal life or IUL policies, with the source.
• Litigation. We search court records for class actions and significant lawsuits over policy charges, illustrations or sales practices, and we report the outcome where there is one. A lawsuit is an allegation until a court or settlement says otherwise, and we describe it that way.
• Regulatory actions. We check state insurance department orders, fines and market conduct examinations, and we report the ones that bear on how the company treats life policyholders.

We only report what we can source to a court record, a regulator, the company itself or a rating agency. Our IUL lawsuits guide covers the industry picture.

Products and living benefit riders

A company's lineup tells you whether it is serious about the kind of policy you want. For each company we note:

• Which IUL products it sells, and whether they are built for cash value accumulation, for death benefit protection at the lowest cost, or both. Each links to its own policy review.
• Other life products: term, guaranteed universal life, whole life and survivorship policies, and whether its term policies can be converted to permanent coverage.
• Index choices: plain S&P 500 accounts, other market indexes and bank-built volatility-controlled indexes.
• Living benefit riders: whether the company offers accelerated death benefits for chronic, critical and terminal illness, whether they are included at no upfront cost or charged for, and how a claim is paid. See our living benefits guide.
• Policy protection riders: overloan protection and no-lapse guarantees, and what they require.

Underwriting speed and options

Underwriting is how the company decides whether to cover you and at what price. We report:

• Accelerated underwriting: whether the company can approve some applicants without a medical exam or lab work, and the age and coverage limits it publishes for that path.
• Traditional underwriting: when an exam and labs are required, and how the company handles common conditions where its published guidelines say so.
• Speed and process: tele-interviews, electronic applications and published target turnaround times, stated as the company's own figures.

We do not rank companies on how friendly they are to specific health conditions unless the company publishes the guideline. Our underwriting guide explains the process from your side.

Service after the sale

A permanent policy needs attention for decades. We look at what the company offers owners: online access to values and statements, how in-force illustrations are requested, how loans and withdrawals are processed, and how claims are filed. Where a company publishes service standards, we cite them. We do not publish service rankings based on anecdotes.

How we stay independent

Tax Free Wealth Plan is a licensed independent insurance agency. When a client buys a life insurance policy through us, the insurance company pays us a commission. You never pay us a fee. Commissions on permanent life insurance vary by company and product, which is exactly why they stay out of our reviews.

• No pay for placement. No company pays to be reviewed, listed or ranked, and there is no sponsored content on this site.
• Commissions never change a verdict. We name the weaknesses of companies we can sell, and we review companies we are not appointed with the same way.
• The ratings are the agencies' own. We display them as published and never adjust them.
• A licensed strategist writes and checks every review. See our editorial policy, our advertising disclosure and how we are paid.

Data sources and updates

Ratings come from the agencies' public announcements and rating lookups, plus company press releases. Complaint data comes from the NAIC. Product, rider and underwriting details come from the company's own product guides and underwriting guides. Track record comes from court records, state regulators and the company's own filings and notices.

We review every life insurance company page at least twice a year. We update sooner when an agency changes a rating or outlook, when a company changes rates on in-force policies or raises charges, or when a significant lawsuit or regulatory action is filed or resolved. The "Updated" date at the top of each review shows the last full check.

Limits you should know about

A rating is an opinion about the future, not a guarantee, and agencies sometimes act after trouble has started. Past treatment of policyholders is the best evidence we have, but a company's management and owners can change. Check the current rating on the agency's own site before you sign. If an insurer does fail, your state's guaranty association provides a second layer of protection for life insurance, up to limits that vary by state.

Questions about a specific review

If you think a rating or fact on our site is out of date, contact us. We will check it against the original source and correct the page if needed.