What every best Life Insurance has:
- Strong financial ratings.
- A long history.
The Better Business Bureau (BBB) grades companies based on how they handle customer complaints. Local BBBs award their own grades, and a given company may get an A in one state and a C in another -- reflecting real-life variations in customer service. Several of the companies that earn top ratings from our other sources also earn the BBB's highest A-plus rating at their headquarters location.
The National Association of Insurance Commissioners collects the complaints people file with their state insurance offices into this searchable online database. You can look up a life insurance company you're considering to find out whether it gets a lot of complaints for its size, and you can get the company's financial profile.
Weiss Ratings is one of five agencies that rate life insurance companies' financial health. It earns a small nod over the others as an independent analysis reports that Weiss' ratings are the most stringent. Weiss posts a list of the financially weakest (ratings of D-plus or lower) and strongest (B-plus or higher) life insurers. You need to register to see the lists, but that's free.
A.M. Best is a ratings agency that assigns insurance companies a letter grade from A++ to D, based on financial strength. This report names 14 life/health insurers that have maintained an A.M. Best rating of A or higher for 75 years and 23 that have done it for 50 years. Of those, nine hold A.M. Best's highest rating, including major carriers State Farm, Northwestern Mutual, Massachusetts Mutual and New York Life.
Northwestern Mutual was one of only four life insurers to earn the highest AAA insurer financial strength rating from Fitch. This rating is "assigned only in the case of exceptionally strong capacity" to meet financial obligations, which is "highly unlikely to be adversely affected by foreseeable events." Ratings are free to view, but registration is required.
Moody's is another agency that rates insurance companies' financial strength. This lengthy list includes the latest ratings for many insurers, but only three U.S. life insurers achieve Moody's highest rating of Aaa: New York Life, Northwestern Mutual and TIAA-CREF. Like most rating sites, free registration is required.
Unlike the other ratings agencies, Standard & Poor's (S&P) doesn't put out a list of the most financially secure insurance companies or allow you to sort its ratings list to find them. It does rate most insurance companies, but you have to look them up individually once you've created a free account. Most of the insurers that get good ratings from other sources earn an AA or AA-plus rating here, but New York Life, Northwestern Mutual and TIAA-CREF do earn S&P's highest rating of AAA for financial strength.
Jeff Reeves notes that with the economy improving, people should be taking another look at their long-term finances with a view toward retirement, including life insurance. He goes on to give an overview of who needs insurance and why term life insurance is probably the best choice. The article includes a thorough explanation of whole life, but ultimately concludes it's not the best investment choice.
Forbes contributor Tim Maurer offers a pithy overview of the difference between term and permanent life insurance, including its effectiveness as an investment. He notes that permanent life insurance is often oversold because it brings agents handsome commissions.