How do Auto Insurance Rankings Work?

Auto insurance rankings are provided by a number of different ratings companies. Moody's and A.M. Best are the most common for insurance companies, but you may also find ratings reports from the Better Business Bureau and other sources. These ratings are important for you to understand if you are with a high-quality company.

Rating of Financial Stability

Auto insurance rankings do not grade whether or not the company does a "good" job providing insurance. They actually rank the financial stability of the insurer. When you pay money in premium, the insurer can invest this money or lend it. This is fine as long as they have it when you need it. Rankings tell you how likely it is they will have the money when you need it.

Legal Requirements

Some states will require you are insured by a company with a certain level of rating. This is truly to protect consumers; the government does not want low-quality companies popping up to provide cheap auto insurance then not paying when it comes time for customers to make a claim. You can ask your DMV about requirements for insurance, and you will likely be given an exact rating required as well as limits required for property and liability coverage.