Nov. 5 (Bloomberg) -- Major U.S. life insurers such as MetLife Inc., Prudential Financial Inc., and Hartford Financial Services Group are reeling from third-quarter losses amid market turmoil and declines from investments. How can consumers tell if their policies are safe?

Here are answers to some basic questions about the safety of life insurance policies:

How do I know if my insurer is financially strong?

The only practical way is to check insurers' ``financial strength'' ratings with rating companies such as A.M. Best Co., Moody's, Standard & Poor's and Fitch, said Glenn Daily, a fee- only insurance financial planner in New York. There are still quality products a few notches below the highest A++ level at A.M. Best.

The Hartford, Prudential and MetLife remain secure places to buy insurance, according to A.M. Best. All their life insurance subsidiaries are rated from A to A+.

``Anything below an A- at A.M. Best makes me wonder if I should be dealing with that company,'' Daily said. ``You're not excluding anything you'd want to buy.''

Anything B+ or above is considered secure, said Stefan Holzberger, assistant vice president at Oldwick, New Jersey- based A.M. Best. Ratings of B through E indicate financial problems.

'Informed Dialogue'

Best's ratings are based on ``an informed dialogue'' with insurance-company management teams, as well as public financial disclosures, Holzberger said.

Companies rated A+ or A++ had an ``impairment rate'' of 4.18 percent over 15 years, Holzberger said. An insurance company is impaired if its state regulator determines it must change its business model or business plan to shore up finances. Not all impaired companies enter default.

The entire life-insurance industry has a negative outlook at the moment, Holzberger said, and lower ratings may be expected for the next 12 to 24 months.

I'm worried about my insurance company and don't want to wait to see what happens. Can I move my policy to another company?

Switching insurers is a mistake, especially with policies such as whole life and universal life that have cash value, said Daily. Changing companies will mean you lose your investment.

``The only way you can really lose money is by dumping a policy because you're worried about strength ratings,'' Daily said.

When the catastrophe hits, it's already too late, said David Schiff, editor of Schiff's Insurance Observer, an industry newsletter. Customers need to buy from a strong company -- that's as important as the price of a policy, he said.

``If a company isn't there to pay a claim, you're getting nothing,'' Schiff said.

Premium Flexibility

Most consumers aren't aware their insurance contract may give them some flexibility on when to pay the premium, Daily added. Some policies are written so cash value in the policy, or dividends, can be used to pay the premium. Another option is to take out a loan against the cash value to cover payments while financial uncertainty continues.

With term insurance, the choice is to stop paying premiums and find a new insurer, but you may face higher rates if you're a lot older from when you started your policy.

What happens if my life insurance company goes out of business?

In the event of a bankruptcy, policyholders are protected under state rules. All 50 U.S. states have life insurance guaranty associations that provide a minimum of $100,000 in cash value and $300,000 in death benefits on all policies.

Higher Limits

Some states, such as New York, New Jersey and Connecticut, offer higher limits, as much as $500,000 on death benefits.

Property and casualty policies are covered by a separate, parallel network of state-backed funds.

For more information on what your state offers and how the state associations work, go to the Web site of the National Organization of Life & Health Insurance Guaranty Associations at http://www.nolhga.com/.

What happens to non-traditional insurance-company offerings such as certificates of deposit or Individual Retirement Accounts?

Insurance companies can now sell you a lot of financial products that aren't related to insurance. The type of protection you have depends on the product, not the company, said Peter Gallanis, president of the national guarantee association. For example, a CD would be backed by the Federal Deposit Insurance Corp. and an IRA would be protected under laws that govern trust companies.

Many insurance companies are now part of larger financial holding companies. The insurance subsidiaries are still regulated by state officials and are covered by the guarantee associations, Gallanis said.

To contact the reporter on this story: Jeff Plungis in Washington at jplungis@bloomberg.net.

Last Updated: November 5, 2008 11:11 EST