When choosing an insurance company, one of the most important—but often misunderstood—factors is the insurer’s AM Best rating. Consumers frequently see ratings like A+, A, or B++ listed on quotes or product pages, yet many aren’t sure what those ratings actually measure, how they’re determined, or why they matter. Understanding what an insurance company’s AM Best rating means can help you evaluate financial strength, claims-paying ability, and long-term stability before committing to a policy.

At Diversified Insurance Brokers, we work with dozens of highly rated carriers across life insurance, annuities, disability insurance, long-term care, and Medicare solutions. Part of our role is helping clients understand insurer strength—not just pricing—so coverage decisions are made with confidence and long-term security in mind.

What Is AM Best?

AM Best is an independent credit rating agency that specializes exclusively in the insurance industry. Unlike consumer review platforms or marketing rankings, AM Best focuses on an insurer’s financial strength and its ability to meet ongoing policyholder obligations. This includes paying claims, honoring guarantees, and maintaining reserves during economic stress.

Because insurance contracts—especially life insurance, annuities, and disability policies—can last decades, financial strength matters just as much as policy features. An AM Best rating is designed to answer one core question: How likely is this insurance company to meet its future obligations?

What Does an AM Best Rating Measure?

AM Best evaluates insurers using a comprehensive framework that goes far beyond current profits. Their analysis includes balance-sheet strength, operating performance, business profile, enterprise risk management, and access to capital. The goal is to assess not just how an insurer is performing today, but how resilient it is under adverse conditions.

For policyholders, this matters because insurance companies must remain solvent through market downturns, interest-rate cycles, catastrophic claims events, and long-term demographic changes. Strong ratings indicate that an insurer is well-positioned to withstand these pressures.

AM Best Rating Scale Explained

AM Best ratings range from the highest levels of financial strength down to companies considered vulnerable. The most commonly encountered ratings include:

A++ and A+ (Superior): These are the highest ratings assigned by AM Best. Insurers in this category demonstrate exceptional balance-sheet strength and a superior ability to meet ongoing obligations.

A and A- (Excellent): Companies rated in this range are considered financially strong with an excellent capacity to pay claims and fulfill policy guarantees.

B++ and B+ (Good): These insurers are considered financially stable but may be more sensitive to adverse economic conditions.

B and Below (Fair to Poor): Lower ratings indicate increased vulnerability and a higher degree of financial risk.

In most long-term planning scenarios, advisors and institutions typically focus on insurers rated A- or better, particularly for products with long guarantees such as annuities, permanent life insurance, and disability income policies.

Why AM Best Ratings Matter for Policyholders

An insurance policy is only as reliable as the company backing it. While state guaranty associations provide limited protection if an insurer fails, those protections are capped and not designed to replace the strength of a well-capitalized carrier. AM Best ratings help policyholders evaluate whether an insurer is likely to remain stable throughout the life of the policy.

This is especially important for products with long-term promises, such as annuities, permanent life insurance, and disability policies that may pay benefits for decades. A strong rating reduces the risk of disruptions, restructuring, or policyholder uncertainty.

How AM Best Differs From Other Rating Agencies

While agencies like Moody’s, S&P, and Fitch also rate insurance companies, AM Best is unique because it focuses exclusively on the insurance sector. Its methodologies are tailored to insurance-specific risks such as underwriting cycles, reserve adequacy, reinsurance structures, and regulatory capital requirements.

That specialization makes AM Best particularly relevant when evaluating insurers for life insurance, annuities, disability coverage, and long-term care policies.

Does a Higher AM Best Rating Mean Better Insurance?

A higher rating reflects stronger financial stability—but it doesn’t automatically mean a policy is better for your situation. Coverage terms, pricing, riders, underwriting philosophy, and product design still matter. Two A-rated insurers may offer very different solutions depending on your goals.

This is why working with an independent broker matters. At Diversified Insurance Brokers, we evaluate both financial strength and product fit, helping clients balance carrier quality with pricing, features, and underwriting flexibility.

AM Best Ratings and Specialized Insurance Markets

AM Best ratings are particularly important in specialized or higher-risk markets, where underwriting nuance matters. For example, clients exploring coverage with medical complexity often want to ensure the carrier backing the policy is financially strong and experienced in niche underwriting.

You can see how carrier strength intersects with underwriting strategy in areas like life insurance with pre-existing conditions and group vs. individual life insurance.

How Often Do AM Best Ratings Change?

Ratings are reviewed regularly and can change as an insurer’s financial condition evolves. Economic shifts, mergers, acquisitions, capital infusions, or adverse claims experience can all influence future ratings. That’s why ongoing monitoring matters for long-term policyholders.

As part of our advisory role, we stay current on carrier ratings and industry developments so clients aren’t left guessing about insurer stability years after purchasing coverage.

How Diversified Insurance Brokers Uses AM Best Ratings

We use AM Best ratings as a foundational screening tool when evaluating insurers—but never in isolation. Our process combines financial strength analysis with underwriting expertise, product comparison, and long-term planning considerations.

Whether you’re evaluating annuities, life insurance, disability coverage, or Medicare-related products, our goal is to align strong carriers with solutions that actually fit your financial objectives.

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