Choosing Insurer That's Last

It is hard to know for sure whether any insurance company or any company for that matter - will still be around in five to 10 years, so how can you tell if an insurance company will exist to service your contract in the years to come? Let's take a look at a few simple actions you can do to figure this out.

First, make decisions about your choice of insurance provider one year at a time. Before you think about renewing your policy each year, check financial ratings, read current news about the insurance industry, and watch trends in the stocks of insurance companies you are thinking about choosing.

Checking Financial Ratings

You can check financial ratings on your state's department of insurance website. Ratings generally range from 'A++' down to 'F'. Similar to report cards, 'A' and 'B' are good, but as you go down the scale you can bet that a particular insurance company isn't currently the valedictorian of financial stability in the insurance world. There is also one rating for companies that are no longer financially rated, which is 'S'.

Before choosing a company based on financial rating for homeowners insurance, check with your mortgage company to make sure your lender will accept your insurance company as your homeowners insurance carrier. Your mortgage company technically owns your house until you pay off your home loan, so it's in the lender's best interest to protect its investment by ensuring that you are insured by a financially secure insurance provider.

Current News About the Insurance Industry

Even if the news you read is about general insurance industry problems, this is a sign that you need to be researching your insurance company or any company you are considering. Conduct internet searches with insurance company names in conjunction with key phrases like "financial problems" and "failure to pay claims".

Watching Stock Trends

Look up the stock prices for your current or potential insurance company. This can easily be done through many investing websites including Investopedia's Stock Search. This is also available through an online brokerage website or your financial advisor's website. You will want to check for trends in stock price over the last six months to five years. If the trend is consistently going downward, it's time to take a harder look at the financial rating - an 'A' rating can quickly became a 'B+' or a 'C-' if the company's financial position worsens.

Red Flags About Payouts

Even if your insurance company is financially stable, it doesn't mean payment on a claim will come easily. Use state agency websites to view all metrics, not just financial metrics, to determine the likelihood of a proper payout in the event of a claim. Pay special attention to the number of complaints listed for any insurance company you currently use or may use in the future. This will give you an idea of the difficulty others have had in receiving payment on their claims.

Throwing in Your Insurance Towel

It's tough to know when the exact right time it is to bail on your insurance company. After all, even investing legend Warren Buffett doesn't always know the right time to dump a stock. You must use your judgment and ask yourself the following questions about your level of satisfaction with your insurance company.

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