(Complete Show Notes Below)
In the 47th episode of the Financial Procast:
Why Do Ratings and Financials Really Matter for Life Insurance Companies?
If you read through any marketing collateral from life insurance companies you'll see all sorts of touting related to their various A+, A++, AA+, etc. ratings. But what does any of that mean and why should you really care about any of it?
Today, we go through a fairly extensive and somewhat cerebral discussion of the numbers that matter, we walk line by line through compiled data of the whole life insurance industry and discuss the numbers that matter, why they matter and how that can effect overall policy performance. Ultimately, how the numbers impact your policy performance is what's really important. Ratings from rating agencies are there to give you a general idea but should by no means be the only metric used to evaluate a company's ability to deliver above average performance.
Most ratings are given to companies based on their financial “stability” and the ability of the company to meet its current obligations i.e. their ability to pay death claims as they arise in the future. While no doubt important, it doesn't provided a clear indication of how well a policy's cash value will perform and for most of our clients, this is THE reason they are using the policy. To find out that level of detail, we have to dig a little deeper. This is something we do on a regular basis as new data is available on a quarterly basis and this keeps our list of potential companies fairly tight.
We promise a more entertaining podcast next week but hope you are able to harvest a few diamonds from this one as well…enjoy!