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An AM Best rating is a grade that shows how financially strong an insurance company is. It tells you how likely the insurer is to pay claims, now and years from now. AM Best is a credit rating agency founded by Alfred M. Best in 1899.
It focuses only on the insurance industry. When you shop for car insurance, the cheapest quote is not always the safest choice. An insurer that fails cannot pay your claim after a crash. Checking the AM Best rating before you buy is a quick way to avoid that risk. This guide covers what the grades mean, how they are set, and how to use them.
What an AM Best Rating Actually Measures
AM Best publishes several types of ratings. For consumers, the most important one is the Financial Strength Rating (FSR). It measures an insurer’s ability to meet its ongoing obligations to policyholders. In simple terms, it answers one question: can this company pay its claims?
An AM Best rating does not measure customer service. It also does not judge claim speed, price, or how friendly the agents are. For example, a company can earn an A++ grade and still have poor complaint scores. As a result, you should treat the rating as one tool among several. Groups like J.D. Power and the NAIC Consumer Insurance Search cover service and complaints instead.
AM Best also issues a Long-Term Issuer Credit Rating (ICR). It uses a scale from “aaa” down to “rd” and is aimed at investors. However, most drivers only need the letter-grade FSR. That is the grade insurers usually advertise on their websites.
How AM Best Builds Each Grade
AM Best analysts review four main building blocks. The first and most important is balance sheet strength. This looks at whether the insurer holds enough capital to cover its risks. AM Best measures this with its Best’s Capital Adequacy Ratio (BCAR).
The second block is operating performance. Analysts check profits, underwriting results, and investment income over several years. The third is business profile. This covers market share, product mix, and geographic spread. The fourth is enterprise risk management (ERM). It looks at how well the company spots and controls risks such as hurricanes or rising repair costs.
Typically, analysts meet with company management at least once a year. Ratings are monitored continually and can change at any time. As a result, an AM Best rating is a living score, not a one-time stamp.
The AM Best Rating Scale Explained
The Financial Strength Rating uses 13 letter grades from A++ to D. It also has special codes for companies in trouble. Grades of B+ and above are called “secure.” Grades of B and below are called “vulnerable.” In most cases, drivers should look for an insurer rated A- or better.
| Grade | Category | What It Means |
|---|---|---|
| A++, A+ | Superior | Superior ability to meet ongoing obligations |
| A, A- | Excellent | Excellent ability to meet ongoing obligations |
| B++, B+ | Good | Good ability to meet ongoing obligations |
| B, B- | Fair | Fair ability; vulnerable to bad economic conditions |
| C++, C+ | Marginal | Marginal ability; vulnerable to adverse changes |
| C, C- | Weak | Weak ability; very vulnerable to adverse changes |
| D | Poor | Poor ability to meet ongoing obligations |
| E | Under Regulatory Supervision | State regulators have stepped in |
| F | In Liquidation | The company is being shut down |
| S | Suspended | Rating suspended due to a sudden major event |
Each AM Best rating also comes with an outlook. The outlook can be positive, negative, or stable. It signals where the grade may head over the next 12 to 36 months. For example, an “A” with a negative outlook could drop to “A-” soon.
AM Best may also add an “under review” modifier. This appears when a big event could change the grade quickly. Typical triggers include a merger, a large catastrophe loss, or a sudden capital drop. Under review status usually lasts a few months while analysts gather facts.
How Major Auto Insurers Typically Score
Most large national auto insurers hold grades in the A range. Historically, State Farm, GEICO, and USAA have held A++ (Superior) ratings. Progressive, Allstate, Nationwide, and Travelers have typically held A+ ratings. However, these grades can change. Always confirm the current AM Best rating on the AM Best website before you buy.
Also note that ratings apply to specific legal companies, not brands. One brand may write policies through several underwriting companies. For example, a budget subsidiary might carry a lower grade than the parent group. Check the name of the company listed on your policy declarations page.
Why Your AM Best Rating Check Matters for Car Insurance
Auto claims can be large and can drag on for years. A serious injury claim may take two to five years to settle. Your insurer must still be solvent when that payment is due. A strong AM Best rating suggests the company will be around to pay.
Insurer failures do happen. Several Florida property insurers collapsed between 2021 and 2023. Some smaller auto insurers in other states have also failed after heavy losses. In those cases, policyholders had to find new coverage fast. Some also waited months for claim payments.
What Happens If Your Insurer Fails
Every state has a property and casualty guaranty association. These groups step in to pay covered claims when an insurer becomes insolvent. However, they have limits. In most states, the cap for a covered claim is $300,000. Some states set different limits, and a few go higher or lower.
Guaranty funds also return unearned premium in many cases, often up to $10,000. Even so, the process is slow. As a result, a claim that would take weeks may take many months. You can learn more through the National Conference of Insurance Guaranty Funds. The best protection is to avoid weak insurers in the first place.
Lenders also care about financial strength. Many auto lenders and leasing companies require coverage from insurers rated B+ or better. Some commercial contracts require A- or better. For example, a rideshare or delivery driver may face such a rule.
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How to Check and Use an AM Best Rating
Checking an AM Best rating is free and takes about five minutes. Follow these steps before you sign up for a policy.
- Go to AM Best’s consumer ratings page.
- Search for the insurer by name. Use the exact underwriting company name from your quote.
- Create a free account if prompted. Basic rating details are free to consumers.
- Note the Financial Strength Rating, the outlook, and the date it was last affirmed.
- Repeat this for each insurer you are comparing.
Next, compare the grade against other data. Look up complaint ratios on your state insurance department website. The NAIC complaint index compares each company to a baseline of 1.00. A score above 1.00 means more complaints than expected for the insurer’s size. Typically, a company with an A grade and a low complaint index is a solid pick.
Setting Your Own Minimum Standard
For most drivers, A- or better is a sensible floor. B++ or B+ insurers are still considered “secure.” However, they carry slightly more risk. If a B+ insurer saves you $400 a year, the trade-off may be reasonable for basic liability coverage. On the other hand, if you carry high limits or own valuable assets, stick with A-rated companies.
Avoid any insurer rated B or lower unless you have no other option. High-risk drivers sometimes face this choice after DUIs or many accidents. In those cases, ask your state’s assigned risk plan for alternatives. You can also check other agencies, such as S&P Global, Moody’s, Fitch, and Demotech. Demotech often rates small regional insurers that AM Best does not cover.
Keep Watching After You Buy
Ratings change, so check your insurer once a year at renewal. A downgrade of one notch is usually not a reason to panic. However, a drop of two or more notches is a warning sign. A negative outlook combined with a downgrade deserves attention too. As a result, you may want to shop for a new policy before problems grow.
Also watch the news for large losses or mergers. Major hurricane seasons and rising vehicle repair costs have pressured insurer profits. For example, U.S. personal auto insurers posted heavy underwriting losses in 2022 and 2023. Many have since recovered with large rate increases. Still, smaller carriers can feel this stress more than national brands.
Frequently Asked Questions
What is a good AM Best rating for a car insurance company?
An AM Best rating of A- or higher is generally considered good. A- and A mean “Excellent,” while A+ and A++ mean “Superior.” In most cases, these insurers have strong ability to pay claims.
Is an AM Best rating of B+ safe?
Yes, AM Best classifies B+ as “Good” and “secure.” However, it carries more risk than A-range grades. Typically, it is acceptable for basic coverage, but A- or better is safer for high limits.
Does the AM Best rating affect my insurance premium?
Not directly. Your premium depends on your driving record, vehicle, location, and coverage choices. However, highly rated insurers do not always charge more, so compare quotes from several strong companies.
How often is an AM Best rating updated?
AM Best reviews most insurers at least once a year. For example, a big catastrophe loss or merger can trigger a review sooner. As a result, it is smart to recheck your insurer at each renewal.
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Official Sources & Resources
For verified information on auto insurance regulations and consumer protection:
- NAIC (National Association of Insurance Commissioners): naic.org
- Insurance Information Institute: iii.org
- Federal Trade Commission — Auto Insurance: consumer.ftc.gov
- USA.gov — Car Insurance: usa.gov/car-insurance
Content last reviewed October 2026. If you notice any outdated information, please contact us.