By Thomas M. Kallman

Insurance is a product where the insurance company promises to make future loss payments in return for a premium you pay today. It is therefore important that you know the financial health of the insurer when you are deciding how much you are willing to pay for the product. For example, holding all other things equal, people should pay slightly more for an insurance policy from an insurance company with a higher financial rating, or should pay slightly less for the same policy from a company which is not as financially strong. In order to make this kind of informed purchasing decision, a number of private organizations, called rating agencies, rate the financial stability of insurance companies. Major insurance rating agencies include the A.M. Best Company, Standard & Poor's, Weiss Research, Duff and Phelps, and Moody's. Each of these companies uses data obtained from various sources to rate the financial strength of insurance companies. It should be noted, however, that each organization has its own rating standards and therefore the financial grades from two different rating agencies may be different. The best advice usually given to insureds is to check the financial rating of the insurer from as many rating agencies as possible to determine the range of opinions of the financial health of the company. Always keep in mind that the financial rating can change at any time, based on market conditions such as claim reserves, fluctuation in investment portfolio balances, as well as overall book of business and its associated risk. A great site to visit is located at : www.ambest.com where you can do in depth research on most major insurance carriers. Another great site can be found at : www.standardandpoors.com where you can sign up for free e-mail rating update alerts on most major insurance carriers.

Thomas Kallman is President of TMK Risk Management Inc DBA Kallman Insurance Agency. PO Box 266736 Weston, Florida 33326. Phone: 954.389.5897 Fax: 954.389.6661 Website: www.tmkrisk.com Your inquiries are always welcome.

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