Does bad credit affect your life insurance premiums?

Bad credit affects a lot of things it makes renting a home harder, obtaining a loan, getting credit cards and buying that new car. Yes, even insurance is affected by bad credit. Why you are probably asking? They say that people with good credit are much less likely to file a claim on insurance other than life insurance. It’s not only that, did you know they believe good credit is a predictor of longevity and good health. We are not kidding there has even been a study done on it in New Zealand. For this reason, life insurers have started using credit as a predictor in the past decade.

Some states have banned credit score and credit reporting for its use in car insurance, not one state has limited your credit scores role for life insurance. Insurers look at credit information much different way than lenders. Someone who has a score from 750 to 850 could be offered a Standard Plus or Preferred Select rate. Whereas someone with a 630 might only have access to a standard rate. Though it might be unlikely insurers could deny you in whole for your credit score especially if you are paying off a chapter 13 bankruptcy.

Studies have been done by LIMRA survey which showed that 18% of insurers used their applicant’s credit reports, 28 percent of insurers used a model by Lexis Nexus Risk Solutions which also has your credit details. This is just another reason why everyone should review their Lexus Nexis file. TransUnion also has a credit-based score just for Life insurance applicants.

Lexis Nexus reports review data from your driving record and also your other public records. With this cumulative information, it creates a score that insurers use to evaluate your insurability. Even your prescription drug history gets highlighted for life insurance, yes all of this information gives them an idea of where to place your rates and whether or not you need to take a medical exam.

Our primary credit monitoring product does give you a look at your insurance score. If you ever are curious you should take a look at smartcredit.com to see what your insurance score is. Reviewing it before you buy any insurance product is a wise idea. Reviewing your Lexis Nexus reports before purchasing life insurance is a good idea. The positive news if you do fail to pay your premiums it will not affect your credit. Most times your policy will just be canceled if you fail to pay, of course having this happen could cause you to lose that locked-in rate you already have. The earlier you buy life insurance the better the rate. Still this another reason why they are analyzing your credit for life insurance is to ensure that you will keep the policy and pay the premiums.

If you have bad credit what are your options for life insurance? Many companies have a life insurance product called Final Expense which is normally reserved for older or unhealthy people. Some other products might exist such as guaranteed acceptance life insurance. What if you want a larger more discounted insurance product to protect you and your family in unfortunate circumstances? We definitely suggest getting your credit repaired before a major life insurance purchase like that.

If you have any questions about getting your credit repaired or what life insurance products might be best for you please contact us. We can repair your credit and get you a lower quote on life insurance all at the same time. Check out our past article about repairing your credit before you buy a home.