What's so important about financial ratings?

As we sit by and watch the financial industry basically implode, how do the insurance companies fit into this mess? The Federal Reserve has bailed out several financial firms that looked like they were destined to go under and there could be more to go. But what about the insurance companies, is it time to worry about them too?
 
A few insurance companies have been caught up in this mortgage fiasco but so far, it seems as though the insurance companies are fairing pretty well. Even so, you still should be a prudent consumer and do your "homework" before you buy any insurance policy.
 
How do you compare insurance companies? What features do you examine? What criteria do you use? How do you know what to look for? Making sure that your insurance company is financially sound is an important part of helping to ensure family security.
 
Fortunately, there are a number of independent companies that make these evaluations. These rating companies carefully examine each insurance company in the areas of profitability, debt, liquidity, and other factors. From the results of these examinations, they then issue overall ratings.
 
Looking up a company's rating will provide you with a snapshot of that company's financial health. Tracking the company's rating on a regular basis may give you some advanced warning of trouble.
 
The four rating services are: A.M. Best, Standard & Poor's, Moody's Investors Service, and Fitch Ratings. Each of these services uses slightly different criteria when rating companies. As a result, each may have a slightly different view of a given company. A.M. Best ratings are based on financial conditions and performance; Moody's, Fitch Ratings, and Standard & Poor's ratings are based on claims-paying ability.
 
Before you buy your next insurance policy, or maybe even the current policies you have now, I would check the financial strength of your insurance company with these services. Hey, you never know!
 
A.M. Best Company: 908-439-2200, www.ambest.com
Standard & Poor's: 212-438-2400, www.standardandpoors.com
Moody's Investors Service: 212-553-0377, www.moodys.com
Fitch Ratings: 800-893-4824, www.fitchratings.com