Obtain a safety rating from the following companies:

A. M. Best Company                         Ambest Road                         Oldwich, New Jersey 08858                         (908) 439-2200

Top rating symbol: A++

Best ratings can be found in Best's Insurance Reports, a volume published annually and available in most libraries.  Ratings can be obtained over the phone for a nominal fee.  The cost to insurance companies to be rated A.M. Best is $500.

Standard & Poor's Corp.                         25 Broadway                         New York, NY  10004                         (212) 208-1527

Top Rating symbol:  AAA

Ask your insurance agent for a photocopy of the rating report.  Ratings for up to five companies can be obtained over the phone at no charge.  Standard & Poor's also provides a Qualified Solvency Rating which focuses on companies most likely to face financial difficulties in the future.  Although the rating process is not as in depth as its claims paying rating, the rating will provide some comfort regarding financial strength.  The rating covers all insurance companies not just those who are willing to pay the steep fee associated with the claims paying rating.  The top solvency rating is BBBq, which implies above average security.

Moody's Investor Service. Inc.                         99 Church                         New York, NY  10007                         (212) 553-0377

Top Rating symbol: Aaa

Ask your insurance agent for a photocopy of the rating report. Ratings for up to three companies can be obtained over the phone at no charge.

Fitch                         55 East Monroe Suite 3500                         Chicago, IL  60603                         (312) 368-3157

Top rating symbol:  AAA

Ask your insurance agent for a photocopy of the rating report.  Ratings for up to three companies can be obtained over the phone at no charge.

Weiss Research                         2200 N. Florida Mango Road                         West Palm Beach, FL  33409                         (800) 289-9222

Top rating symbol:  A+

Weiss Research provides the following rating services:  (1) Personal Safety Report, an 18-page detailed safety report for $45, (2) Personal Safety Brief, a summary of the Personal Safety Report for $25, and (3) a verbal rating between A and F and the meaning of the rating.  Cost is $15 per company.

Evaluate the following financial ratios:

• Total Capital to Invested Assets Ratio                       
  The capital ratio should be 7% or more to absorb business or investment losses.
  
  
• High-Risk Assets to Capital Ratio
  The ratio should be less than 200 percent.  High-risk assets include non-investment grade bonds, mortgages overdue more than 90 days, mortgages in the process of being foreclosed, real estate acquired by foreclosure, and troubled real estate.  The higher this ratio, the greater the possibility the company's capital and its ability to pay claims will be jeopardized.
  
  
• Non-investment Grade Bonds (Junk Bonds) to Capital Ratio
  This ratio should not exceed 50 percent.
  The ratios shown above can be found in the Insurance Regulatory Information System (IRIS) ratios published by the National Association of Insurance Commissioners.
        
• Risk-Based Capital Ratio
  This ratio measures how much capital an insurance company has to support the risk inherent in its investments and insurance activities.  The ratio is designed to act as an early warning signal to help regulators identify companies who might be in trouble.  The ratio also empowers regulators to take measures against the company.  The ratio is calculated by dividing a company's capital by a minimum amount that insurance regulators believe is needed to support its activities.  If the ratio falls below 125%, a state insurance department can request more information from the company.  If the ratio falls below 50%, the state regulators can take over the company, and if it falls below 25%, the state must take over the company.  Insurance companies are not allowed to use this ratio in their marketing materials.
  

Other steps for evaluating the company strength include:

(1) Review the company's statutory report, or 10-K, filed with the state insurance department; (2) find out if the state where you live has a state guarantee fund that guarantees the claims of defunct insurers.  Also investigate the strength of the guarantee fund; (3) determine whether the company has sufficient products to allow it to survive if one product is made obsolete due to tax or other legislative changes; (4) compare the turnover ratio of the sales force with that of other companies. A company that has a low turnover ratio generally has lower operating expenses; and (5) compare the persistency rate--how long the policy holders stay with the company, with that of other companies.  A high persistency rate of  60% or better means that the company is going to be more efficient and have a longer investment strategy that can endure declines in investment cycles.

• Deal only with insurance companies that have an A++ rating from A. M. Best and a top rating from at least one other rating service.  Stay clear of any company that does not receive one of the top four grades of any rating service.
  
  
• If the insurance company you do business with is in financial trouble consider the following before you take your cash:
  
  
  • Will you be subject to surrender penalties and taxes if you withdraw your funds?
    
    
  • If you own life insurance will you be able to qualify for coverage with another company?
    
    
  • If you own cash-value insurance consider taking out the accumulated cash through a policy loan.
    
    
  • If you are receiving monthly payments from a fixed annuity you generally cannot bail out.
    
    
  • If you wish to bail out of an insurance or annuity contract without triggering taxable income, consider an Internal Revenue Code section 1035 exchange.  After you provide the 1035 exchange form to the new insurance company they will arrange for the transfer of the funds.
    
    
  • If you receive cash upon surrendering your life insurance or annuity contract to a financially troubled insurance company that is subject to rehabilitation, conservatorship, or insolvency or similar state proceedings, you must reinvest or rollover the money in a single policy or contract of another company within 60 days.  Revenue Procedure 92-44
    
    
  • To make it less expensive for you to move from one insurance company to another, consider purchasing no load or low load commission life insurance.