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Why should you take out disability income protection insurance?

To guarantee income continuity in the event of sickness or accident.

To avoid a company having to fund the continuing salary for a disabled employee longer than may be otherwise desirable.

To pay the expenses of the business which would continue to be payable in the event of a principal owners disability

Understanding Insurance Ratings, and Insurance Rating Companies

Your disability insurance is only as good as the company that issues it. So when you buy disability insurance, it's wise to make certain that the issuing company is financially sound. The A.M. Best Company, Standard & Poor's, and Moody's Investors Services are well-regarded rating companies that provide objective measures of insurance companies' creditworthiness. Here is a sample of their ratings and what they mean.

A.M. Best Company

Standard & Poor's

Moody's Investors Services

The A.M. Best Company: A.M. Best is perhaps the best known of all the insurance rating companies. It publishes over 50 different information products about insurance companies and the insurance industry. Here is an overview of what the A.M. Best rating system means.

The following ratings are considered "secure" ratings by A. M. BEST:


	A++ and A+ (Superior):

	A and A- (Excellent):

	B++ and B+ (Very Good):


	The company has demonstrated superior overall performance and has a very strong ability to meet its obligations to policyholders over a long period of time.

	The company has demonstrated excellent overall performance and has a strong ability to meet its obligations to policyholders over a long period of time.

	The company has demonstrated very good overall performance and has a good ability to meet its obligations to policyholders over a long period of time.


	*The following ratings indicate that a company is "vulnerable" to financial difficulties in the future by A. M. BEST:*


	B and B- (Adequate):

	C++ and C+ (Fair):

	C and C- (Marginal):

	D (Very Vulnerable):

	E (Under State Supervision):

	F (In Liquidation):


	The company has an adequate overall performance and can meet its obligations to policyholders, but may be vulnerable to unfavorable changes in underwriting or economic conditions.

	The company has demonstrated fair overall performance and can meet its current obligations to policyholders, but is vulnerable to unfavorable changes in underwriting or economic conditions.

	The company has demonstrated marginal overall performance. It can meet its current obligations to policyholders, but it is very vulnerable to unfavorable changes in underwriting or economic conditions.

	The company has demonstrated poor overall performance. The company can meet its obligations to policyholders, but is extremely vulnerable to unfavorable changes in underwriting or economic conditions.

	The company is under state insurance regulatory authority supervision, control or restraint, such as conservatorship or rehabilitation, but not including liquidation. This rating may be assigned if the company is under a cease and desist order issued by a state regulator other than from its state of domicile.

	The company has been placed under an order of liquidation by a court of law, or its owners have voluntarily agreed to liquidate. Companies that voluntarily liquidate or dissolve their charters are generally not insolvent.

Standard & Poor's: Standard and Poor's rates the claims-paying ability of over 300 insurance organizations worldwide, and monitors public data on another 2,000 U.S. companies.

The following ratings are considered "secure" ratings by Standard & Poor's:


	AAA

	BBB


	Superior financial security on an absolute and relative basis. Capacity to meet policyholder obligations is overwhelming under a variety of economic and underwriting conditions.


	Excellent financial security. Capacity to meet policyholder obligations is strong under a variety of economic and underwriting conditions.
				AA


	Good financial security, but capacity to meet policyholder obligations is somewhat susceptible to adverse economic and underwriting conditions.
				A


	Adequate financial security, but capacity to meet policyholder obligations is susceptible to adverse economic and underwriting conditions.


	*The following ratings are considered "vulnerable" ratings by Standard & Poor's:*


	CCC

	Plus (+) or Minus (-) sign


	Financial security may be adequate, but capacity to meet policyholder obligations, particularly with respect to long-term or "long-tail" policies, is vulnerable to adverse economic and underwriting conditions.
				BB


	Vulnerable financial security. Currently able to meet policyholder obligations, but capacity to meet policyholder obligations is particularly vulnerable to adverse economic and underwriting conditions.
				B


	Extremely vulnerable financial security. Continued capacity to meet policyholder obligations is highly questionable unless favorable economic and underwriting conditions prevail.


	Not Rated. The insurer is not rated by Standard & Poor's.
				NR


	Regulatory action. As of the date indicated, the insurer is under supervision of insurance regulators following rehabilitation, receivership, liquidation, or any other action that reflects regulatory concern about the insurer's financial condition. Information on this status is provided by the National Association of Insurance Commissioners and other regulatory bodies. Although believed to be accurate, this information is not guaranteed. The "R" rating does not apply to insurers subject only to non financial actions such as market conduct violations.
				R

The ratings from "AA" to "B" may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. Standard & Poor's ratings and other assessments of creditworthiness and financial strength are not a recommendation to purchase or discontinue any policy or contract issues by an insurer or to buy, hold or sell any security issued by an insurer. In addition, neither a rating nor an assessment is a guaranty of an insurer's financial strength.

Moody's: Moody's Ratings, founded in 1909, rates the financial strength of a variety of investment vehicles and institutions, including corporate bonds, preferred stock, short-term debt, mutual funds and insurance companies.

The following ratings are considered "strong" by Moody's:


	Exceptional financial security. While the financial strength of these companies is likely to change, such changes as can be visualized are most unlikely to impair their fundamentally strong position.
				Aaa


	Excellent financial security, together with the Aaa group, they constitute what are generally known as high-grade companies. They are rated lower than Aaa companies because long-term risks appear somewhat larger.
				Aa


	Good financial security. However, elements may be present which suggest a susceptibility to impairment sometime in their future.
				A


	Adequate financial security. However, certain protective elements may be lacking or may be characteristically unreliable over any great length of time.
				Baa


	The following ratings are considered "weak" by Moody's:


	Questionable financial security. Often the ability of these companies to meet policyholder obligations may be very moderate and thereby not well safeguarded in the future.
				Ba


	Poor financial security. Assurance of punctual payment of policyholder obligations over any long period of time is small.
				B


	Very poor financial security. They may be in default on their policyholder obligations or there may be present elements of danger with respect to punctual payment of policyholder obligations claims.
				Caa


	Extremely poor financial security. Such companies are often in default on their policyholder obligations or have other marked shortcomings.
				Ca


	The lowest rated class of insurance company; can be regarded as having extremely poor prospects of ever offering financial security.
				C

	1, 2, 3 Modifiers for each generic rating category from Aa to B. 1 indicates that the insurance company ranks in the higher end of its generic rating category. The modifier 2 indicates a mid-range ranking. The modifier 3 indicates that the company ranks in the lower end of its generic category.