Ask Money

Is it worth paying more for a high rating?

Chris Farrell Feb 18, 2011

Question: We received quotes for 20-year level term life insurance ($1 million) and found that there is a $600 annual difference between the highest AAA rated company and the others, which range in rating from A- to AA. Is the AAA rating worth the $12,000 over the lifetime of the policy or should we just go with the cheapest policy? Thank you! Joyce, Monterey Park, CA

Answer: I think it’s worth it the extra cost to go with a highy rated insurance company, (By the way, the main rating agencies use different categories to grade the soundness of life insurance companies; the key is to stick with the highest ratings.) You buy life insurance for peace of mind in case something bad happens.

There’s no guarantee, of course, but the odds of a highly rated insurance company having a strong balance sheet to pay claims over the next 20 years are good. Its financial strength is an additional layer of comfort and security. So, I would focus on shopping for the best price among highly rated companies.

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