Rating Drops on the Rise! What to Do If Your Home Insurance Provider Loses Their A-Rating
Thousands of Florida homeowners have been affected by several home insurance companies losing their A-rating. So it’s a good time to find out what happens if that happens with your insurer, as well as if your insurer would actually go out of business.
If ratings start to drop, then you are left wondering what to do next. Should you hang with the company as its rating drops? Should you find a new one altogether? And if you do have to look for a new insurance provider, what do you do to find the right coverage?
There are dozens of questions to be answered when it comes to insurance, especially when it looks like the company might dissolve altogether. It might just be time to find another provider.
The best way to find the right insurance coverage and the provider is to compare homeowners insurance. Of course, there are a dozen different pieces to consider, but one of those should also be the insurance provider’s company rating.
What is an A-rating for a home insurance provider?
Many parents spend hours, days, and even months choosing the best grade school for their children. It’s a choice that can have major consequences for the children and the parents. But few homeowners will take more than a few moments to choose their home insurance provider.
But why? When a homeowner uses an insurance provider they are trusting that company to protect their home – one of the single greatest investments a person can make. Picking just any insurance provider won’t do. That’s why it’s so important to look at A-rated insurance providers.
What exactly does this high rating mean? An A-rating for a home insurance provider means they are strong financially. With an A-rating, these companies are believed to be financially viable and can easily pay out claims or repay creditors.
If a company has an A-rating, new and existing clients can feel confident that the company will be around for a while. These highly rated companies aren’t likely to see financial strain or close their doors completely. So customers, both new and old, can feel confident in their choice of home insurance provider.
How are home insurance providers graded?
If there’s an A-rating for insurance providers, then there are other grades, right? That’s true. Insurance providers are rated on a multi-point scale. The possible letter grades can range from A++ to F, similar to grades given out in classrooms.
The exact grades can differ depending on the company doing the grading, but there are only a few differences. Even with these differences, the grades carry very similar meanings and weights.
These grades aren’t given by the insurance companies themselves. They are created, evaluated, and given out by third-party companies that specialize in this type of evaluation. Some of the most common or well-known grading companies include A.M Best, Fitch, Moody’s, and Standard & Poor’s.
And while there are differences, all of these companies give their ratings based on very similar criteria. These companies look at everything from an insurance provider’s claims payment history to the company’s structure and management style. The combination of these pieces of information results in a company’s rating.
What makes them lose their grading?
Once an insurance company gets a high rating, it doesn’t mean the high rating will stick around. Companies can lose their A-rating if their finances become less stable, putting creditors and customers at greater risk of losing money.
How exactly a company is downgraded is hard to say. The process itself is confidential, but the result speaks volumes. If an insurance company gets downgraded, customers often get a little nervous.
It is important to know that a downgrade to a company’s rating doesn’t immediately mean it’s time to hit the eject button. Even companies in some of the lower levels can still provide services, but it doesn’t hurt to start looking for other coverage, just in case.
How do you find a new home insurance provider?
If you see your insurance provider take a downturn in the area of ratings, then it might not be a bad idea to start the insurance shopping process. The search process can be daunting and a little more than overwhelming.
But you want to find a new provider with a good rating, right? So how do you find that out? There are two great places to find out how well an insurance company is doing. The first is to do a little research with the experts.
You can research a potential insurance provider by looking up their rating with one of the more well-known evaluation companies. Remember each of these companies has slightly different rating systems, so an insurance provider’s rating could be slightly different.
A second option is to look for any complaints lodged against a company. The National Association of Insurance Commissioners has a section on its website specifically for complaints and issues with various insurance providers. This website also provides financial information on different insurance companies, so you can see how stable a provider is before purchasing an insurance policy.
What if your insurer dissolves?
There is a chance that your insurance provider doesn’t right the ship after a downgrade. If the rating gets too low, then the company could go insolvent and dissolve. This spells big trouble for current clients.
If the company dissolves, there is no home insurance and that means all those homes are at risk. The good news is the state has set up safety nets for these issues.
Every state has something called the guarantee system. This system is activated when a home insurance provider is no longer in business. Any insurance provider in any state is required to be a member of the guarantee system in order to protect policyholders.
If the guarantee system is activated, then all policies from the failing company are transferred to another company. This means it’s very important that you keep paying your premiums so your coverage isn’t interrupted.
So if you’re a Florida resident or worried about a downgrade in your insurance provider, don’t fret. Even if the worst-case scenario happens and the company dissolves, you and your home are still protected.