An insurance company’s financial strength offers a look at its ability to pay claims. As a policyholder, assuming that your insurance company will pay your claim when you file it is natural. But if a company doesn’t have the funds available, it can’t make good on its contractual obligation.
This guide explores why financial strength matters for insurance companies and highlights the most financially stable car insurance companies in 2025.
- An insurer’s financial strength indicates its ability to pay out claims.
- An insurance company with poor financial strength might not remain solvent to pay out policyholder claims.
- In 2025, the most secure and financially stable insurers include Travelers, State Farm and GEICO.
Why insurer financial strength matters
When exploring your insurance options, you might come across different financial strength metrics for insurance companies. While it’s easy to overlook yet another rating measurement, taking a closer look at a potential insurance company’s financial strength is important.
An insurer’s financial strength essentially measures its solvency. An insurance company with a robust financial strength score is often financially stable, which means it’s likely to make good on the terms of the insurance policy when a policyholder files a claim.
In contrast, a low financial strength score might indicate that a company doesn’t have enough cash reserves to maintain financial stability. In the worst-case scenario, this lack of financial stability could lead to financial insolvency, which means there would be no payouts to policyholders filing a claim.
Naturally, working with a financially stable insurer makes the most sense, especially if you want to minimize the risk of an insurer not paying out your claim.
Understanding AM Best: The industry benchmark
AM Best is a credit rating agency that operates in over 100 countries around the world. This organization offers the gold standard for evaluating the financial stability of insurance companies.
According to a guide from the company, the AM Best rating “is an independent opinion of an insurer’s financial strength and ability to meet its ongoing insurance policy and contract obligations.”
What AM Best evaluates
Within the evaluation framework, AM Best looks at many metrics, including the following:
- Assets
- Reserves
- Underwriting discipline
- Long-term financial strategy
A careful look at the details above gives the rating agency a solid look into a company’s financial strength.
AM Best rating scale: What A++, A+ and A really mean
When you first encounter AM Best ratings, it can feel frustrating because the metrics start with A++, A+ and A. Since each of those sounds like a great score, it can be hard to discern what these scores mean.
Quick tip
Always look for an A or higher to ensure a company maintains a strong financial footing.
The table below offers some clarity on the AM Best rating scale.
| Score | Rating | What it means, in the opinion of AM Best |
|---|---|---|
| A++; A+ | Superior | Insurers with a superior ability to meet their ongoing insurance obligations. |
| A; A- | Excellent | Insurers with an excellent ability to meet their ongoing insurance obligations. |
| B+, B++ | Good | Insurers with a good ability to meet their ongoing insurance obligations. |
| B; B- | Fair | Insurers with a fair ability to meet their ongoing insurance obligations. |
| C+, C++ | Marginal | Insurers with a marginal ability to meet their ongoing insurance obligations. |
| C, C- | Weak | Insurers with a weak ability to meet their ongoing insurance obligations. |
| D | Poor | Insurers with a poor ability to meet their ongoing insurance obligations. |
Note: These ratings focus on claim-paying ability, not customer service or premium cost.
2025’s top-rated, financially stable car insurance companies
GEICO, State Farm and Travelers topped the list of financially stable car insurance companies in 2025. However, many other companies earned AM Best ratings of A and above, which means they have excellent or superior abilities to keep up with their insurance obligations.
The table below highlights the top-rated, financially stable insurance companies of 2025.
| Company | Direct premiums written | Market share | AM Best rating |
|---|---|---|---|
| Allstate | 32848168906 | 10.37% | A+ |
| American Family | 6790422620 | 2.14% | A |
| Amica | 1383042128 | 0.44% | A+ |
| Auto-Owners | 4250282927 | 1.34% | A+ |
| Erie | 4240246199 | 1.34% | A+ |
| Farmers | 13221687478 | 4.18% | A |
| GEICO | 38965761608 | 12.31% | A++ |
| Liberty Mutual | 13312836211 | 4.20% | A |
| Nationwide | 5413758272 | 1.71% | A |
| Progressive | 48255874744 | 15.24% | A+ |
| State Farm | 57974270313 | 18.31% | A++ |
| The Hartford | 2126384701 | 0.67% | A+ |
| Travelers | 6578946202 | 2.08% | A++ |
| USAA | 19847915798 | 6.27% | A++ |
Note: We excluded Safeco from our list because it’s a subsidiary of Liberty Mutual.
How to check your insurer’s financial strength
If you didn’t see your insurance company in the table above, or want to double-check, here’s how to check your insurer’s financial strength rating:
- Head to the AM Best rating website.
- Enter your insurance company’s name in the search tool.
- Select the insurance company.
- Create a free account with an email and password.
- Review the company’s AM Best rating.
How to factor stability into your insurance buying decision
“Financial strength is the consumer’s guarantee of claims-paying ability,” says Anthony Verreos, licensed insurance agent and Strategic Insurance Advisor at Real Estate Bees. “If your insurer is unable to pay your claim when needed, then your money has been wasted and your trust has been misplaced.”
Since an insurer’s financial stability has the potential to significantly impact your wallet, it’s a good idea to take a look at an insurance company’s AM Best rating before committing to a policy. When possible, stick with insurance companies that hold high financial strength ratings.
Does financial strength affect price or customer experience?
Financial strength ratings don’t take price tags or customer experience into account. Instead, the financial strength metric strictly focuses on a company’s financial position and its ability to pay claims.
Of course, price is a factor when choosing an insurance company. However, if an insurer cannot pay your claim in the future, the discounted premiums upfront might not work out well for your wallet in the long term. Price and financial strength should both be considered.
Look for companies with a good financial strength rating before comparing premiums. This will help you avoid insurers with less stability.
It’s worth noting that opting for a company with an A++ rating doesn’t always mean you’ll pay more.
What to do if your insurer’s rating drops
The financial strength of an insurance company can change over time. If your insurer’s financial stability falls, here’s how to take action:
- Review your policy: Start by confirming your current policy is in order.
- Reassess your risk tolerance: If you aren’t comfortable with the new rating, it might be time to find a new insurance company. If you are comfortable with the latest rating, you don’t need to make any changes.
- Check for alternatives with higher ratings: If you want to change insurers, shop around to find a company with the right rating and premiums for your situation.
FAQs
Are A-rated companies still safe?
An AM Best score of ‘A-’ represents an ‘Excellent’ rating. These companies have an excellent ability to meet their ongoing insurance obligations.
How often do AM Best ratings change?
AM Best monitors insurance companies’ financial stability regularly, and the ratings can change at any time depending on an insurer’s situation.
Do higher-rated companies charge more?
Higher-rated insurance companies don’t necessarily charge more. Your insurance premiums vary widely based on your situation. With that, it’s best to shop around to find an insurer that offers affordable rates and an attractive rating.
Final takeaway: Secure your future with a stable provider
Financial stability metrics offer a window into an insurer’s ability to pay future claims. If you opt to work with an insurer with poor financial stability ratings, it’s a risk to your wallet. When possible, consider financial ratings, in addition to customer service and pricing, when determining which policy is best for you.
Resources & Methodology
Sources
- AM Best, “Company and Rating Search.” Accessed May 2025.
- Insurance Information Institute, “How to assess the financial strength of an insurance company.” Accessed May 2025.
Get advice from an experienced insurance professional. Our experts will help you navigate your insurance questions with clarity and confidence.
Browse all FAQs