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Understanding Insurance Ratings and Insurance Rating Companies

Your long term care insurance is only as good as the company that issues it. So when you buy long term care insurance, it's wise to make certain that the issuing company is financially sound. The A.M. Best Company, Standard & Poor's, and Moody's Investors Services are well-regarded rating companies that provide objective measures of insurance companies' creditworthiness. Here is a sample of their ratings and what they mean.
   
 

Moody's: Moody's Ratings, founded in 1909, rates the financial strength of a variety of investment vehicles and institutions, including corporate bonds, preferred stock, short-term debt, mutual funds and insurance companies.

The following ratings are considered "strong" by Moody's:
AAA Exceptional financial security. While the financial strength of these companies is likely to change, such changes as can be visualized are most unlikely to impair their fundamentally strong position.
AA Excellent financial security, together with the Aaa group, they constitute what are generally known as high-grade companies. They are rated lower than Aaa companies because long-term risks appear somewhat larger.
A Good financial security. However, elements may be present which suggest a susceptibility to impairment sometime in their future.
BAA Adequate financial security. However, certain protective elements may be lacking or may be characteristically unreliable over any great length of time.

The following ratings are considered "weak" by Moody's:
BA Questionable financial security. Often the ability of these companies to meet policyholder obligations may be very moderate and thereby not well safeguarded in the future.
B Poor financial security. Assurance of punctual payment of policyholder obligations over any long period of time is small.
CAA Very poor financial security. They may be in default on their policyholder obligations or there may be present elements of danger with respect to punctual payment of policyholder obligations claims.
CA Extremely poor financial security. Such companies are often in default on their policyholder obligations or have other marked shortcomings.
C The lowest rated class of insurance company; can be regarded as having extremely poor prospects of ever offering financial security.

1, 2, 3 Modifiers for each generic rating category from Aa to B. 1 indicates that the insurance company ranks in the higher end of its generic rating category. The modifier 2 indicates a mid-range ranking. The modifier 3 indicates that the company ranks in the lower end of its generic category.