The B+ company is so much cheaper, but is it worth the risk?
That rating is an indicator of the financial health of the insurer. That’s important to you because you need to be certain that if you were in an automobile accident the insurer will be able to pay the claims. If the insurer were to fail, you would be left with the burden to bear on your own. Consider that one automobile accident can create claims with $ amounts sufficient to exceed all the money you will pay in premium for a lifetime. You want your insurer to be able to pay those claims so you don’t have to.
That said, do note that those ratings change from time to time. The particular insurance company you are considering may well be in good financial health but recently found itself in a temporary adverse condition. For example, after hurricane Katrina many insurance companies found their balance sheets significantly changed, even some who did not themselves have any claims from the area the storm hit. Insurance companies buy insurance just like you do in order to protect them from catastrophic events. It’s called reinsurance. After Katrina and other recent large scale events, some reinsurers got out of the market. And, after considering the amount of damage, many insurers decided they needed to protect themselves with additional reinsurance. Of course, decreased supply and increased demand results in higher prices. Thus many insurance companies now found themselves paying more for reinsurance. They also found their rating (such as that B+) downgraded as it became clear the magnitude of potential claims is growing higher and higher.
All businesses find their relative financial health varies as the markets vary. The difference with insurance is that you can’t afford to be uninsured. The promise that insurance policy provides to you is worthless if the insurance company fails. But it is invaluable when you need it.