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Life insurance consists of promises you make to an insurance company (primarily to pay premiums) and promises it makes to you (mostly to pay the claim). Ratings of life insurance companies tell you how much you can depend on the company to be able to live up to those promises. If the company is financially sound, it is highly likely to be able to pay the death claim or the cash surrender value when required. If the company has a very high rating, it will usually have no difficulty at all in fulfilling its part of the contract.

Low rated companies can be more problematic, but most low rated companies are able to pay their claims as well. Of the 3000 or so life insurance companies, only a very few get in really serious financial trouble. Even the ones that cannot pay their claims are eventually rescued by the insurance regulators, together with other insurers.