Will Your Credit Score Affect Your Life Insurance Rates?
You are probably aware of how your credit history can affect your life in many ways. From purchasing a home to signing up for phone service, companies look to your credit record to make their decision. However, did you know that some life insurance companies now also factor in credit history when deciding whether or not to cover you? Your credit score could affect your life insurance rate.
Poor Credit History Indicates Someone Might Be a Potential Risk
You may be wondering what your credit history has to do with life insurance. Most insurance policies look at health history alone. But a poor credit history may indicate that a person is a potential risk, which can lead to higher premiums. Here’s why:
*Indicates Unstable or Inconsistent Finances
A poor credit history comes with a certain amount of risk for the company because it means a person’s finances may not be stable. If there are repossessions or other negative things on the credit report, the company may be worried they won’t be paid on time either. So, even if you will not be denied coverage, you may have to pay more for it if you go with an company that checks credit history.
*Indicates Potential Illegal Activity
If someone has a poor credit score, especially if there are bankruptcies and repossessions, this could indicate the person has not dealt above board with their finances. Some people with unsavory backgrounds will file bankruptcy or leave a trail of unpaid bills, not because of poor money management but because they are trying to scam the companies out of money. They will take out credit cards and other loans, planning on never paying the bills. The life insurance industry is concerned with any activity that appears fraudulent, illegal or “shady.” So, when they see a disastrous credit background, they may think that the person may have been involved in shady practices. And if the person committed fraud with their finances, then that person may attempt to do the same with their life insurance policy.
*Indicates Possible Medical Problems
Health problems are one of the main things that life insurance companies look for when approving someone for a life insurance policy. And while credit reports don’t generally show medical information, there seems to be a relationship between poor health and low credit scores. In fact, studies* conducted by the National Institutes of Health found a correlation between cardiovascular disease and individuals with a poor credit score. Furthermore, increased mortality rates were also linked to a lower credit score. These indicators are red flags for those in the life insurance industry.
Do You Have Poor Credit?
If you have a poor credit history but would still like an opportunity to get reasonable rates for life insurance, there is hope for you. Not every life insurance company uses credit report scores to make their decision.
At Asurea, we’ll check around to see which companies would be the right fit for you.
Asurea offers Life Insurance, Mortgage Protection Life Insurance, Medicare Supplement Insurance, Final Expense Insurance, Disability Insurance, Long-term Care Insurance, Retirement Planning products and more. For additional information, click on the ‘Learn more’ button below. Want to have articles just like this delivered to your inbox? Just enter your email address in the box below and click ‘Subscribe.’
This information is provided for general consumer educational purposes only and is not intended to provide legal, tax or investment advice. Dollar amounts are for illustrative purposes, not actual.
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