When you buy a car, you look for things like the J.D. Power rating of the vehicle. When you choose a bank, you make sure it is not on the Fed’s list of “distressed” institutions. When you get renters insurance what do you do?
Why should you use A.M. Best when comparing renters insurance?
A.M. Best (and other companies) rate the financial strength of renters insurance companies. Why is the balance sheet of your renters insurance carrier important?
The remainder of this article will examine just how important the AM Best Rating is and why The Insurance Experts For Renters consider it so important.
Who Cares About A.M. Best?
You pay your renters insurance premium with the intention of having money paid to you in the event of a covered loss. By doing so, you’re trusting that the renters insurance company will have the money, and that there will be sufficient funds available to pay claims in the event of a loss.
Transparency and accountability are always positive things. Some renters insurance companies are publicly traded, and you can review their financial filings, but who has time for that? I, for one, certainly don’t have time to review reams of paper to make sure my renters insurance company is going to have the money it needs in the event of a catastrophe. That is why I rely on the Insurance Experts For Renters at Effective Coverage. But even the Experts at Effective Coverage need some help, that’s where A.M. Best comes in.
A.M. Best takes the financials of the renters insurance company, analyses those statements, past performance, current market conditions, and a host of other factors, and comes up with a grade.
You can use these grades to compare renters insurance companies. A is good. B is decent, but not as good as A, and so on. There are, of course, sub-grades within these levels, but that gives you a pretty basic idea of what these letters mean. By having a simple system, in theory it’s safer to buy insurance because you have a good idea that the company will still be around in another 150 years.
What happens if the renters insurance company isn’t around?
After the tornado in Joplin, MO, three renters insurance companies which were not prepared for the disaster became insolvent. Their policy holders were not left out in the cold altogether – most states have guaranty funds for exactly this purpose, making sure that claims are paid. Not unlike a bank, the state insurance department often will take over the company and try to find a buyer to fold the company into. Obviously this is a less than ideal situation for everyone involved.
Take another example with Hurricane Sandy. There was so much devastation that a New Jersey Renters Insurance or New York Renters Insurance company could have easily gone out of business. Fortunately because of the strong AM Best ratings of the New Jersey Renters Insurance companies this was not a concern.
A.M. Best can help prevent situations like the above by holding renters insurance companies publicly accountable for their financial condition. In so doing, the public has advance warning of problems and the company has an outside perspective on what problems may require attention in order to prevent them becoming larger.
Effective Coverage sells policies with some of AM Bests highest ratings! Let us help you meet your renters insurance needs.