Insurance Curator When you shop for term life insurance, you compare premiums, coverage amounts, and policy terms. But one factor often gets overlooked: the financial strength rating of the life insurance company itself. That rating tells you whether the carrier will be around decades from now to pay your claim.
An A+ rating (or higher) signals exceptional financial stability. For a term life policy—a pure death benefit with no cash value—the only promise is that your beneficiaries will receive the payout. If the insurer fails, that promise becomes worthless. That’s why understanding financial strength ratings is not optional; it’s essential.
In this deep dive, we’ll explain how ratings work, why A+ life insurance companies matter for term life insurance, how to verify ratings, and how to use trusted resources to make an informed choice.
What Are Financial Strength Ratings?
Financial strength ratings are independent assessments of an insurance company’s ability to meet its long-term obligations—primarily paying claims. These ratings are issued by specialized agencies that analyze balance sheets, investment portfolios, reserves, and historical performance.
The major rating agencies include:
- A.M. Best – The most widely used in the insurance industry. Its scale ranges from A++ (Superior) to D (Poor).
- Standard & Poor’s (S&P) – Scale from AAA (Extremely Strong) to D (Default).
- Moody’s – Scale from Aaa (Exceptional) to C (Lowest).
- Fitch Ratings – Scale from AAA (Exceptionally Strong) to D (Default).
For term life insurance, A.M. Best is the most relevant because it focuses specifically on insurance company solvency. An A+ (Superior) rating from A.M. Best indicates that the company has a strong ability to meet its ongoing obligations.
The Rating Scale at a Glance
| Rating Agency | Highest Rating | A+ Equivalent | Lowest Rating |
|---|---|---|---|
| A.M. Best | A++ | A+ | D |
| S&P | AAA | A+ | D |
| Moody’s | Aaa | A1 | C |
| Fitch | AAA | A+ | D |
A+ is considered “Superior” by A.M. Best and “Strong” by S&P. It sits one notch below the top tier (A++ or AAA). Companies rated A+ have demonstrated very strong financials and low risk of default.
Why A+ Life Insurance Companies Matter for Term Life Insurance
Term life insurance is straightforward: you pay a fixed premium for a set period (10, 20, or 30 years), and if you die during that term, your beneficiaries receive the death benefit. There’s no cash value, no investment component—just a pure promise.
That promise only holds if the company remains solvent. If it goes bankrupt, your family could be left with nothing. According to Life Insurance Made Simple: A Clear and Practical Guide for Every Stage of Life, understanding carrier strength is the first step to buying wisely. (Learn more about choosing a policy in our guide on How to Compare Life Insurance Companies: Key Factors to Consider?.)
The Long-Term Nature of Term Life
Even a 20-year term policy requires the insurer to maintain financial health for two decades. Economic downturns, poor investment decisions, or catastrophic claim events can erode a carrier’s surplus. An A+ rating gives you confidence that the company can weather those storms.
- Claims-paying ability – The strongest predictor of a successful claim.
- Reinsurance backing – A+ carriers often have robust reinsurance programs.
- Regulatory compliance – High ratings correlate with strong state solvency regulation.
The Cost of Ignoring Ratings
Choosing a low-rated carrier might save a few dollars monthly, but the risk is substantial. In the past, several insurers have been placed under state supervision or liquidated. Policyholders often receive only a fraction of the death benefit, sometimes after years of legal delays.
An A+ life insurance company minimizes that risk. The premium difference between an A+ and an A- carrier is often negligible relative to the security gained. As one expert put it, “You’re not buying life insurance—you’re buying peace of mind. A rating downgrade can shatter that peace.”
How to Check a Company’s Financial Strength Rating
Verifying a carrier’s rating is easier than ever. You can check directly on the rating agency websites or use independent aggregators.
Steps to Verify
- Visit A.M. Best’s website (ambest.com) and search for the company name.
- Look for the Financial Strength Rating (FSR) and Issuer Credit Rating (ICR).
- Cross-check with S&P or Moody’s for a second opinion.
- Check the rating history—has it been stable, upgraded, or downgraded recently?
Most top-tier life insurance companies proudly display their ratings on their websites. If a carrier does not publish its financial strength ratings, consider that a red flag.
Pro tip: Even among A+ rated companies, the size and diversity of the company matter. A mutual company owned by policyholders (like Northwestern Mutual or New York Life) often has a longer track record of stability than a stock company.
Top A+ Life Insurance Companies (Examples)
While we cannot endorse specific carriers, several well-known names consistently hold A+ or higher from A.M. Best:
- Northwestern Mutual – A++ (Superior)
- New York Life – A++ (Superior)
- MassMutual – A++ (Superior)
- Guardian Life – A++ (Superior)
- Principal Financial – A+ (Superior)
These companies also excel in customer service and online convenience. For more on that, see our article about Top-rated Life Insurance Companies for Customer Service in 2024.
What About Online-Only Insurers?
Some digital-first carriers offer competitive term rates and instant approval. However, their financial strength ratings can be lower if they are newer or have smaller capital reserves. Always check the rating before buying. Our guide on Best Life Insurance Companies for Online Applications and Instant Approval covers which digital carriers still meet high financial strength thresholds.
Resources to Master Life Insurance Knowledge
Understanding financial strength ratings is just one piece of the puzzle. To truly become an informed buyer, you need reliable educational materials. Below are three outstanding resources that cover everything from rating analysis to policy selection.
1. Life Insurance Made Simple: A Clear and Practical Guide for Every Stage of Life
This book demystifies the entire life insurance landscape. With a 4.8 rating (34 reviews), it explains how ratings affect policy pricing and why A+ carriers are worth the premium. It covers term, whole, and universal life, making it perfect for beginners and seasoned buyers alike.
Price: $34.99
Rating: 4.8/5
2. Life Insurance 101: The Basics of Life Insurance Explained
If you prefer a concise, no-nonsense introduction, this is it. At $14.95 and a 4.1 rating, it walks you through the differences between term and permanent coverage, how insurance companies set premiums, and why financial strength matters more than brand name.
Price: $14.95
Rating: 4.1/5
3. Life Insurance, 15th Ed.
This comprehensive textbook is the gold standard for industry professionals. It’s priced at $150.00 and rated 4.2/5. Within its pages, you’ll find a detailed explanation of how rating agencies evaluate insurers—including the exact formulas and risk models used. Ideal for agents, underwriters, or anyone who wants expert-level depth.
Price: $150.00
Rating: 4.2/5
Comparison Table
| Feature | Life Insurance Made Simple | Life Insurance 101 | Life Insurance, 15th Ed. |
|---|---|---|---|
| Price | $34.99 | $14.95 | $150.00 |
| Rating | 4.8 (34 reviews) | 4.1 (8 reviews) | 4.2 (19 reviews) |
| Focus | Practical guide for all stages | Basics for beginners | Industry-level textbook |
| Depth on Financial Strength | Moderate | Basic | Expert-level |
| Target Audience | Consumers, families | First-time buyers | Agents, underwriters |
| Buy at Amazon | Buy Now | Buy Now | Buy Now |
All three resources will deepen your understanding of why A+ life insurance companies matter and how to select the right policy with confidence.
Life Insurance Companies That Accept Pre-existing Conditions
Many people with health issues worry that their condition automatically disqualifies them from quality coverage. That’s not true. Several A+ rated carriers offer competitive term life policies for individuals with managed conditions like diabetes, high blood pressure, or even a history of cancer (after a waiting period).
Our dedicated article on Life Insurance Companies That Accept Pre-existing Conditions provides a breakdown of which carriers have the most lenient underwriting, and how their financial strength ratings hold up. Always prioritize an A+ carrier even when dealing with a pre-existing condition—because a claim denial due to insolvency is far worse than a higher premium.
Frequently Asked Questions
What is a financial strength rating for life insurance?
A financial strength rating is an independent evaluation of an insurance company’s ability to pay claims. Rating agencies like A.M. Best assign letter grades based on the company’s capital reserves, investment quality, and historical performance.
Why does A+ matter for term life insurance?
Term life insurance pays a death benefit only if you die during the policy term. If the insurer fails before that, your beneficiaries may lose the payout. An A+ rating indicates strong financial health, reducing that risk.
Can I trust a carrier rated A- instead of A+?
A- is still a good rating, but it falls into the “Excellent” category (A.M. Best). The difference is small, but for a 30-year term policy, sticking with A+ or higher adds an extra layer of security. Always check the rating history for stability.
How often are financial strength ratings updated?
Most agencies update ratings quarterly or after major corporate events (mergers, acquisitions, large losses). You can sign up for alerts on the rating agency websites.
Do all life insurance companies have public ratings?
Yes. All licensed insurers must undergo financial examination, but not every company chooses to be rated. If a carrier has no rating from any major agency, avoid it. Legitimate carriers always seek ratings to attract customers.
Where can I learn more about selecting a safe life insurance company?
We recommend reading Life Insurance Made Simple for a consumer-friendly overview, or Life Insurance, 15th Ed. for technical depth. Both explain how to evaluate ratings and avoid common pitfalls.
Final Thoughts
Financial strength ratings are not just a checkbox on an insurance shopping list—they are the bedrock of the entire purchase. A term life insurance policy is only as good as the company that issues it. By insisting on an A+ life insurance company, you protect your family from the devastating possibility of a default.
The effort to verify ratings takes minutes. The peace of mind lasts decades. Use the resources linked above to educate yourself, and always cross-check ratings from at least two agencies before signing a policy.
Remember: saving a few dollars on a low-rated carrier is never worth the gamble. Choose an A+ carrier, and sleep soundly knowing your loved ones will be taken care of.