What does my credit have to do with my insurance premium?

What does my credit have to do with my insurance premium?

Insurance companies use your credit history to help price your insurance policies.   This has been going on for several years now.  A number of studies show a strong connection between credit history and loss experience.  Consumers with stronger credit tend to have fewer claims.  For that reason, companies use credit, along with more traditional rating information to determine your premium.  So, what does my credit have to do with my insurance premium?

What happens if you co-sign a loan for a family member and they default on the loan?  Your credit rating drops and your premiums go up. This can affect your premium for years. Or you have great credit and just bought your first house or a new car?  Your credit rating changes temporarily and again your premiums can be affected.    But if you ride out these fluctuations, your premium will likely even out or reduce as your score quickly improves.

Pay attention to your credit.  Problems incorrectly reported to the credit bureaus will adversely affect your insurance score.  You are entitled to a copy of your credit history from each of the three reporting bureaus.  If you stagger your requests for your free report, you can get one every four months.  And do get one from each company as they may show different information.

REMEMBER - Insurance Bureau Scores ARE NOT based in whole or part on any of these factors: income, race, ethnic group, religion, gender, marital status, age, occupation, location, disabilities, or sexual orientation. In addition, if state law prohibits or limits the use of other factors such as the absence of a credit history or factors related to medical expenses, a death in the family or other extraordinary events like a divorce, a loss of employment or identity theft, the insurance companies comply fully with such laws.

Insurance Bureau Scores are NOT the sole factors used for rating.  Other factors such as driving records, coverage limits, property values, maintenance and updates, loss and accident histories, in addition to Insurance Bureau Scores, are used to rate insurance policies.