The financial strength and claims-paying ability of an insurer is one of the first questions asked when trying to ascertain suitability of life insurance products.   However, financial strength and claims-paying ability ratings of the insurer are only one of at least five major suitability considerations and are often misunderstood to mean more than just the financial strength and claims-paying ability of the insurer.  For instance, the answer to the question: “Is this a good product?” is all too often “Yes, the company is highly rated.”

An insurer that is highly rated for financial strength and claims-paying ability does not necessarily mean that every product they manufacture is suitable for every age/gender combination, every health risk class, every policy size, every product type, or every funding strategy. In the same way that no investment company offers the best investment products for every client situation, no life insurance company offers products that are best in all client situations. Instead, certain life insurers excel in manufacturing products that are particularly competitive in certain client situations just like certain investment companies are known for certain types of mutual funds.  Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the suitability standard in Advisor’s Journal, see Life Insurance Product Suitability (CC 10-90).

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Tags: Financial services, insurance, life insurance, Term life insurance

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