As you’re shopping for life insurance, you may wonder what factors impact your premium and rates. While your credit score doesn’t have a direct impact on the cost of your premium, insurance carriers will review your credit report as a measure of your financial status and reliability.This review process allows insurance carriers to give you an insurance score. This score is based on your financial history, including income and debts, and other factors like your driving record and medical history. In this article, we’ll explore why life insurance companies perform credit checks and other factors that may affect your policy rates.
Why do life insurance companies check your credit?
Although life insurance companies won’t directly use your credit score to influence your premium, you can expect them to review your overall credit report. Your credit report can reveal any substantial financial incidents, like filing for bankruptcy, that may cause the carrier to view you as a risk Just like they’ll review your medical history, occupation and driving history, life insurance carriers will want to take a look at your credit history to learn more about how risky you may be to insure.There are two types of credit checks insurance companies can perform: a hard pull and soft pull. A hard pull can have a negative impact on your credit score, so companies always ask permission before performing this kind of credit check. Insurance carriers perform a soft pull, which provides an overview of your credit history without having an impact on the score. Hard credit pulls offer a more comprehensive look at your financial history, although soft pulls can be just as accurate and offer organizations detailed information about your credit history without affecting your score.When reviewing your credit history, insurance companies may look out for these details, since they indicate you may be a riskier individual to insure:
A high percentage of credit card use
A history of carrying large credit card balances
Having filed for bankruptcy
A history of late or missed debt payments, including credit card payments
Other Factors That Influence Your Life Insurance Premiums
Credit history isn’t the only factor insurance companies consider when evaluating your insurability. Insurance carriers will take a holistic overview of your habits, health and lifestyle to determine what coverage they can offer and your individual premium cost. Life insurance companies also review:
Your career and occupation: Life insurance carriers will want to review your occupation to determine if you have a dangerous job, since this could make you riskier to insure. For example, if you work in a high-risk career field or your job requires you to spend a lot of time on construction sites or behind the wheel, your insurance premium may be higher.
Your medical history: When calculating your life insurance rate, carriers will also take a look at your medical history to analyze your risk level and assess your overall health. This helps them determine whether they’re able to offer you coverage and what rates they can charge depending on the potential risk associated with offering you coverage.
Your hobbies and lifestyle: Besides a high-risk career, insurance carriers will also want to know if you have any dangerous hobbies when determining the coverage they can offer. For example, if you regularly participate in rock climbing, skydiving or motocross, it can impact the cost of your rates and premium.
Your age: Insurance carriers will also want to know your age, since younger people are generally considered lower risk for life insurance coverage. That’s why the younger you are, the more affordable life insurance can typically be, so we suggest finding a plan that suits your needs as soon as possible.
SelectQuote Can Answer Your Questions About Credit Scores and Life Insurance Premiums
Looking for life insurance coverage can be stressful when you’re dealing with negative indicators on your credit report. At SelectQuote, we can ease your nerves by answering your questions related to your credit history and life insurance coverage possibilities. Our experienced licensed insurance agents will take the time to learn about your unique situation and needs, all with the goal of helping you find the right coverage for you. When you’re ready to explore your options, shopping with SelectQuote can help you take the guesswork out of life insurance policies and premiums.
