Understanding the Financial Strength Ratings of Life Insurance Carriers

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The primary reason consumers purchase a life insurance policy is to ensure their loved ones have a financial safety net once they’ve passed on. For the vast majority, that safety net isn’t needed for years, even decades, after the policy’s inception. How devastating would it be to have a carrier collect your premium every year, only to find out they’re financially unstable and unable to pay the death claim when it comes up?

While life comes with no guarantees, there are a number of companies that recognize the importance of consumers partnering with financially stable life insurance carriers. They have made it their mission to evaluate each insurers’ financial strength, sharing their findings with the public.

Which Rating Agencies Can You Trust?

There are four major rating agencies:  A.M. Best, Standard & Poor’s, Fitch, and Moody’s. Each has their own method of evaluating insurance companies, but they’re primarily looking at the carriers financial holdings, average amount the insurance company pays in claims, and how much they’re collecting in premiums.

Since each organization evaluates companies differently, it’s a good idea to compare several financial strength ratings before making a financial decision. You will also want to have a clear understanding of each company’s rating scale, as they vary from one to the other.

A.M. Best – Focuses primarily on insurance companies. Access to A.M. Best requires free registration.

Standard & Poor’s – In addition to insurance carriers, Standard & Poor’s rates financial businesses and products. Access to Standard & Poor’s requires free registration.

Fitch – In addition to insurance carriers, Fitch rates financial businesses and products. Access to Fitch requires paid registration.

Moody’s – In addition to insurance carriers, Moody’s rates financial businesses and products. Access to Moody’s will require a free registration process.

Understanding the Ratings

To accurately determine the financial security of a life insurance company you’re considering, you’ll need a basic understanding of their ratings.

Each rating agency will assign one of nine to sixteen financial strength ratings. They are rating long-term financial strength and the carrier’s ability to pay out future claims.

Highest financial strength ratings vary from agency to agency. A.M. Best’s strongest ratings are A++ and A+.  Moody’s top ratings are Aaa and Aa.  Fitch and Standard & Poor’s top ratings are AAA and AA.

Whenever possible, stick with a company who has earned the strongest financial ratings. Steer clear of those who have earned ratings at the low-end of the scale. To ensure accuracy, refer to each agency’s rating scale, located on their website, when making comparisons. Do NOT rely on what the insurance carrier says about their ratings; conduct your own research to ensure accuracy.

While is it natural for price to influence our decision, choosing a life insurance policy based solely on premium is strongly discouraged. Before entering into a legal contract with a carrier, make sure you understand how they conduct business, how long they’ve been in business, and the strength of their financial portfolio, long-term. Your independent insurance agent can help you identify the best policy to fit your family’s needs, which should include assistance researching financial strength and ratings.   

5 Common Reasons Why a Beneficiary Could Be Denied Death Benefits

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One of the most caring things you can do for your family is ensure financial security after your death. For most, this is done through a life insurance policy. In most cases, the death benefit is paid without any issues. Unfortunately, there are situations where the beneficiary is denied pay out, leaving them both financially and emotionally stressed.

Here we explain the most common mistakes consumers make that lead to the denial of a life insurance claim:

1) Material Misrepresentation

Once you enter into your contract/life insurance policy with the insurance company, your two year contestability periods begins. If you pass away during that time, the claims representative will conduct an investigation to ensure everything on your insurance application was truthful and that nothing was left out. If you lied or omitted on your application, the carrier has the right to refuse pay out, regardless of the cause of death.
Once you’ve survived the contestability period, the beneficiary’s risk of being denied due to misrepresentation is significantly reduced.

2) Policy Lapse Due to Nonpayment of Premiums

This is probably the most common reason for claim denial. While premium payment is required for the policy to remain in force, there are times when nonpayment of premium isn’t a sufficient reason for denying a claim. Beneficiaries who are denied for this reason should confirm with the carrier that premium-due notices were sent in a timely manner, to the correct address, and that the notice very clearly warned the insured that a policy lapse was imminent.

3) The Type of Death Isn’t Covered

Historically, life insurance carriers excluded death from dangerous activities such as skydiving, war, or scuba diving. While this is no longer the norm, many carriers will still exclude death by suicide. Many carriers now waive that exclusion once the policy’s contestability period runs out.

4)  Beneficiary Designation Not on File

When filling out the application, be sure to designate both a primary and secondary beneficiary. If no one is designated, your loved one could be denied pay out. Every policy has provisions regarding who should be paid out in this situation, as do most states. While a claim will, eventually, be paid, non-designation of a beneficiary will, at the very least, prolong the process.

5) Post-Divorce Beneficiary Changes

In many divorce cases involving minor children, life insurance is ordered by the court. The ex-spouse is to be listed as the beneficiary on the policy and must be maintained until the minor child is of age. If the parent later violates this court order by changing beneficiaries, the new beneficiary could be denied coverage.

In a perfect world, every life insurance claim would be paid out without delay or question. If you find yourself in this unfortunate situation, be sure to consult with a professional immediately. Make sure you understand your legal rights and obligations and do not accept the denial without going through the appeals process. More often than not, it’s worth the battle.

7 Ways to Support Someone Who is Grieving

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“I’m so sorry for your loss.”

”Let me know if there’s anything I can do.”

”My condolences.”

These are the standard responses we are trained to offer when someone we care about suffers a loss. What can you possibly say that will truly help comfort this person?

The truth is – nothing. There is not a single thing that will magically erase the pain, sadness, and turmoil this person is feeling. What you can do, is be present. Let your grieving loved one know that you’re there for her/him by being open, receptive, and available, both physically and emotionally.

Finding the right balance between being present and overbearing can be a little confusing. So, we’ve compiled a list of suggestions from professionals across the globe, with definitive ways to help loved ones navigate through the grieving process.

How to Make Your Presence Count

1) Open a line of communication as soon as possible. It’s important to remember that grief often makes people feel alone and afraid. Shortly after the loss, contact them, acknowledge the loss, and let him/her know they are not alone. Phone calls, texts, emails, and letters are all acceptable methods of contact.

2)  Share similar bereavement stories. Again, this time can be lonely. Hearing from others who have endured similar situations reminds the person that they will be ok. They will smile and laugh again.

3) Listen. Robert Neimeyer, a psychology professor at the University of Memphis, says, “We need to have big ears and a small mouth when we’re addressing a bereaved person.” Encourage your friend to talk about whatever it is that’s on their mind. Whatever it is they choose to talk about, listen with interest.

4) Think, then speak. While there’s not really anything you can say that will take away the pain, there are many things you can say that could compound it. A good rule of thumb – think about what you would like to hear, were the roles reversed.

  • Don’t ever compare their loss to the loss of a pet. Yes, pets are family too but, this is neither the time, nor the place.
  • Do always remember how personal grief is. Don’t tell your friend how they are feeling or should feel.
  • Don’t be overly optimistic, particularly in the beginning. While your intentions might be true, optimism in those early days only minimizes your friend’s loss.

5) Encourage them to cry when they feel like they need to. Crying is cathartic. Never say “don’t cry.” Their crying might make you uncomfortable but, this isn’t about you. Just be there for them with a gentle touch, hug, or hand held. And if they don’t want to cry, that’s ok too. Again, we all process a loss differently.

6) Let them grieve on their timeline. Being present should last well beyond the first week. Unless you’ve been asked to leave them alone, check in on your friend on a regular basis. Keep a calendar with important dates, such as anniversaries and birthdays, making a special point to touch base on those difficult days.

7) Share memories. Help ensure the deceased’s legacy lives on. Share photos and stories, either in person or written. Make a point to laugh with them as much as you can. If you did not know the deceased, ask to hear stories. You’d be surprised what you might learn about your loved one.

Do:

  • Say the deceased’s name.
  • Be specific when offering to help. Find out what needs aren’t being met and focus on those.
  • Offer to help with paperwork, bills, and opening the mail. These tasks can feel daunting for someone in mourning.
  • Offer to accompany them to sign the death certificate.
  • Make them laugh any chance you get.

Don’t

  • Offer to help and not follow through.
  • Force your help. If alone time is what your friend needs, give it to them.
  • Bring up religion or say things like “He’s in a better place now.”
  • Send flowers right away. Wait a few months, when everything has died down. You have no idea what such a simple act of kindness can do for someone who is trying to get used to their “new normal.”