In 10 minutes, you can verify whether your insurer has the capital to pay claims when you need them. Most people buy a policy, pay for years, and never check—then discover at claim time that the company is financially stressed, under investigation, or slow to settle.

Here’s what nobody mentions: an A+ financial rating doesn’t mean your claim gets paid fast or fairly. Financial strength is one of three checks. The other two—claims handling and coverage adequacy—are separate, and all three matter. This guide walks you through the stability check, names the exact tools to use, and shows you what the ratings actually measure and what they leave out.

The three-check framework

Checking an insurer requires three independent lookups, not one:

  1. Financial stability — Does the company have the capital to pay claims? (AM Best rating, state solvency oversight)
  2. Claims handling — Do they pay promptly and fairly? (State complaint ratios, regulatory actions)
  3. Coverage adequacy — Does the policy cover what you need? (Policy terms, exclusions, limits)

This article covers check #1. A company can be rock-solid financially (A+ rating) and still deny claims aggressively or tie up payments in disputes. Conversely, a B+ rated regional carrier may handle claims faster and fairer than a household name. You need all three pieces.

What you’ll need

Tools:

  • Web browser
  • Your insurance company’s exact legal name (check your policy declarations page—it’s often different from the brand name)

Time:

  • 5–10 minutes for the basic lookup
  • 15–20 minutes if you cross-check multiple rating agencies or dig into state complaint data

Step 1: Look up the AM Best rating

AM Best is the dominant financial rating agency for insurers in the U.S. It rates approximately 16,000 companies globally using a Best’s Financial Strength Rating (FSR) on a 16-point scale from A++ (superior) down to D (in receivership).

Where to look: Go to AM Best’s public ratings lookup (free, no login required). Enter your insurer’s legal name. The result shows the current rating and the date of the last update.

What the rating means:

  • A++ or A+ (Superior): Exceptional financial strength. These companies have deep capital reserves and consistent profitability.
  • A or A− (Excellent): Very strong. Most major national carriers sit here.
  • B++ or B+ (Good): Solid, but not bulletproof. Common for regional carriers. Monitor for change.
  • B or B− (Fair): Adequate but watch closely. May have had recent losses or shrinking market share.
  • Below B− (Vulnerable or worse): High risk. Look for alternatives if possible.

What to watch for: A+ to B+ is generally considered stable. B to B− warrants monitoring for downgrades. Below B−, the risk of insolvency rises materially. But remember: a rating is a snapshot, not a guarantee. Companies’ finances can deteriorate between quarterly updates—especially after a major hurricane, wildfire, or underwriting loss.

Step 2: Cross-check with S&P or Moody’s (optional but useful)

Close-up of hands holding an insurance policy declaration page
Photo by Mikhail Nilov on Pexels

If your insurer is publicly traded or a large national carrier, S&P Global Ratings and Moody’s Investors Service also rate it. These agencies focus on overall creditworthiness—bond and debt risk—not just insurance claims capacity, so their insurance company credit rating is often more conservative (lower) than AM Best’s.

S&P scale: AAA (highest) → AA → A → BBB → BB → B → CCC → D

Moody’s scale: Aaa → Aa → A → Baa → Ba → B → Caa → Ca → C

Where to look:

  • S&P Global Ratings
  • Moody’s (most data is institutional-access only, but major insurer ratings appear in financial news)

Why bother? If AM Best rates a company A+ but S&P rates it A− or BBB+, the gap itself is a signal. S&P may be flagging debt exposure, rapid growth, or geographic concentration that AM Best weighted differently. Disagreement doesn’t mean one agency is wrong—it means the company is stable but worth monitoring.

Step 3: Check your state insurance commissioner’s database

Every state has a Department or Commissioner of Insurance that licenses insurers, investigates complaints, and enforces solvency rules. This is where you find red flags that ratings miss: surging complaints, regulatory fines, cease-and-desist orders, or state examinations.

Where to look: Use the NAIC State Insurance Regulators directory to find your state’s commissioner office. Most states maintain a searchable complaint database by company name.

Examples:

What to look for:

  • Complaint ratio: Number of complaints per 1,000 policies. Above the state median is a yellow flag; 2× the median is red.
  • Recent enforcement actions: Fines, license restrictions, or consent orders. These appear in press releases on the commissioner’s site.
  • Examination reports: Some states publish solvency exam findings. If the insurer is under “enhanced oversight” or “corrective action,” that’s a warning sign even if the AM Best rating is still B+ or A−.

Step 4: Verify guaranty fund coverage (if relevant)

If your insurer is small or rated below B+, understand how your state’s guaranty fund works. It’s your safety net if the insurer becomes insolvent.

What guaranty funds do: Every state has a guaranty fund that steps in if an insurer fails. Coverage is typically $100,000–$500,000 per claim, depending on state and line (auto, home, life). Payouts can take 6–24 months from the insolvency declaration.

What guaranty funds do NOT cover:

  • Policy cancellations or refunds for premiums paid
  • Disputes over whether a claim should have been covered (coverage disputes are separate from insolvency)
  • Claims above the state cap

Where to check: Search “[your state] insurance guaranty fund” or check the National Conference of Insurance Legislators for an overview of state fund structures.

Bottom line: Guaranty funds are a safety net, not a substitute for choosing a stable insurer. Better to avoid insolvency than rely on a capped, delayed payout.

What the ratings measure—and what they don’t

Insurance rating letters and financial documents arranged on a work desk
Photo by RDNE Stock project on Pexels

AM Best measures:

  • Capital reserves (can the company cover expected claims plus catastrophic losses?)
  • Liquidity (can it pay claims this quarter without selling assets?)
  • Profitability trends (is the company making or losing money on underwriting?)
  • Risk management (does it spread risk geographically and by line?)

AM Best does NOT measure:

  • Claims handling speed or fairness. An A+ company can still drag out claims, lowball settlements, or deny on technicalities.
  • Customer service. Ratings say nothing about ease of filing a claim, responsiveness, or how the adjuster treats you.
  • Pricing. A financially stable company can still charge high premiums or offer poor value.
  • Coverage breadth. Strong financials don’t mean the policy actually covers what you need—that’s in the policy wording, not the rating.

This is why you need the three-check framework. Stability is necessary but not sufficient.

Real warning sign: case study

United Insurance Holdings (Florida homeowners): Rated A (Excellent) by AM Best in 2021. Downgraded to B in 2022 after Hurricane Ian losses, then to C-range in 2023. Florida regulators forced the company to stop writing new policies and transfer existing policies to a state-backed entity. Policyholders paid premiums to a stable-looking carrier, then faced non-renewal and a scramble for replacement coverage mid-policy term.

Timeline of deterioration:

  • 2021: A rating, rapid growth in Florida coastal markets
  • 2022: Hurricane Ian hits; AM Best downgrades to B
  • 2023: Company stops writing new business; state forces runoff; rating drops to C+
  • 2024: Remaining policies transferred; company exits Florida homeowners market

Lesson: An A rating in 2021 didn’t prevent collapse in 2023. The warning signs—geographic concentration in Florida, rapid growth, catastrophe exposure—were visible in the rating methodology notes but easy to miss. If you’d checked annually, the 2022 downgrade to B would have been your signal to shop.

When to re-check

Financial strength isn’t static. Re-check your insurer’s rating:

  • Annually at renewal time (5 minutes, same lookup)
  • After a major regional catastrophe if your insurer operates in the affected area (hurricanes, wildfires, floods)
  • If you see a news story about your insurer (regulatory fine, CEO departure, merger/acquisition, mass layoffs)
  • If your premium jumps more than 15–20% without a claim or coverage change (can signal underpricing catching up or financial stress)

A downgrade from A to A− is normal volatility. A drop from A to B+ or B in one quarter may signal need to re-evaluate your options.

FAQ

What does AM Best rating mean?

AM Best’s Financial Strength Rating (FSR) reflects an insurer’s ability to pay claims, on a scale from A++ (superior) to D (in liquidation). A+ to B+ means financially stable; B to B− means adequate but watch for change; below B− means high risk of insolvency. The rating measures capital reserves, liquidity, profitability, and risk management—not claims handling or customer service.

How do I check if an insurance company is financially stable?

Use AM Best’s free public lookup tool at ambest.com to pull the company’s Financial Strength Rating. Cross-check with your state insurance commissioner’s complaint database for regulatory actions or solvency concerns. For large carriers, verify the S&P or Moody’s credit rating. A stable company will have an AM Best rating of B+ or higher, no recent regulatory sanctions, and a complaint ratio at or below the state median.

Why does a company have different credit ratings from different agencies?

Because AM Best, S&P, and Moody’s use different methodologies and time windows. AM Best focuses on insurance-specific risk (claims reserves, underwriting profit). S&P and Moody’s weight bond and debt exposure more heavily, so their ratings are often more conservative. Disagreement usually signals “stable but monitor for change,” not that one agency is wrong.

Can an insurance company fail?

Yes. Roughly 1–3 insurers per year become insolvent in the U.S., usually due to catastrophic losses, poor underwriting, or fraud. State guaranty funds cover most claims, but coverage is capped at $100,000–$500,000 per policy (varies by state and line) and payouts can take 6–24 months. The guaranty fund does not cover policy refunds, coverage disputes, or claims above the cap.

Is a good AM Best rating a guarantee my claim will be paid?

No. It means the company has the money to pay claims, not that it will pay yours quickly, fairly, or at all. Claims can be denied for coverage reasons (exclusions, policy limits, disputes over cause of loss) regardless of the insurer’s financial strength. Check the state complaint database separately for patterns of claim denials or delays.

A stable insurer is one piece of smart coverage. The other two—fair claims handling and adequate policy terms—require separate checks. If your current carrier is A− or better, has a low complaint ratio, and the policy covers your actual risks, you’re set. If any of those three checks fails, it’s time to shop. Coverage, pricing, and solvency oversight vary by state and insurer; stability is the floor, not the ceiling.

Not insurance or financial advice. This article provides general information on checking insurer financial ratings. Insurance coverage, pricing, and solvency oversight vary by state, insurer, and line of coverage. Consult a licensed agent or your state insurance commissioner for guidance on your specific situation.