Auto Insurance Ratings: What Do They Mean?

Getting affordable auto insurance is mandatory for almost every driver in the country. Therefore, it is important that a driver find an insurance company that is reliable.

There is no point in paying for a policy if the insurance company will not provide payment on a claim. Auto insurance ratings have been established to help consumers find companies who are financially stable. Grades are issued ranging from A to F. What does each grade mean?

A Warning About Auto Insurance Ratings

Consumers should be aware that the auto insurance ratings can be manipulated. Insurance companies can actually buy their rating level in some cases. The companies themselves may not give you a rating at all if you ask.

It is a good idea to call one of the many ratings groups available. These groups simply give you a rating based on their own independent data. They have no incentive to manipulate the rankings.

What Does a rating of A-AAA Mean for an Insurance Company

Having a grade in the A range means the company is financially stable. There is enough money to pay out any claim that is filed. Customers can rest assured that their money is not being spent on a policy that will not provide the coverage that is paid for. Companies with a grade of AAA are the best of the best. Well-known companies such as State Farm or Geico will be in this category.

What Does a Rating of B-BBB Mean for an Insurance Company

Any insurance company with a grade in the B range may be having some minor financial issues. Companies with a grade of BBB are generally considered to be secure enough to pay out on any claim filed. Try to stay away from any insurer who has a B or B- rating. They may not be able to pay when you file a claim in certain situations.

What Does a Rating of C or CC Mean for an Insurance Company

Customers should be wary of any company that has a rating anywhere in the C range. These companies tend to be struggling with their finances. It could be that they write insurance policies for customers who file a lot of frivolous claims. Expecting payment for even a small claim could be hit or miss with a company that has a rating of C or CC.

An insurance company with a rating at this level may be a new company that has not had a chance to establish itself. Do your homework before purchasing your policy with a company at this level.

What Does a Rating of R Mean for an Insurance Company

Customers should be advised that any company that has a lower than C ranking is most likely under federal supervision. The company has most likely filed for bankruptcy or is being liquidated. The possibility also exists that the company in trouble with federal regulators. Stay away from these types of auto insurance companies because you are most likely being scammed.

Many companies with a rating of R will be based on the Internet. They will submit phony paperwork from a fake address. Often times there will be no one to talk to if you ever need assistance.

What If A Company Is Not Listed

Some insurance companies will not be listed in the auto insurance rankings. This is most likely because of damaging information being provided about the company. Consumers should treat a non-listed company the same way they would a company that is rated R. Anyone looking through the rankings should also note that a company can have itself taken off the ratings list. However, no reputable company will refuse to participate.

How Are Rankings Determined

Each ratings agency will use its own criteria for determining a rating. However, there are some common criteria that each company uses. These criteria are:

• How Much Debt A Company Has
• How Many Customers Each Company Has
• The Credit Score Of The Particular Company
• The Overall Reputation Of The Company Within The Industry

Insurance companies that do not have a lot of debt, many customers and an excellent credit score will be given an A grade. A company that has few customers, high debt and a low credit score will be given a low grade. Insurance providers who do not grade well will most likely have a poor reputation within the industry.

Does The Ranking Impact Your Quote

The financial stability of a company does not always correlate to the amount it charges. You could be paying more for insurance with a B rated company than you would for a company rated AAA.

This is just another factor you need to take into consideration when choosing an insurance company. However, companies that have less financial stability tend to charge less to get more business. Enter your ZIP into our FREE quote generator to start saving today!

Final Thoughts

You should consider how financially stable a company is before purchasing a car insurance policy. The last thing you want is to have a policy that is useless when you need it the most. Strive to go for the highest rated company you can find.

Having a policy with a company that has an A rating will ensure that you are not being taken advantage of. Remember to always shop around for the best deal before settling on any particular company.