Credit Rating Insurance

Your credit rating can affect virtually any activity today, including insurance. With a good credit rating, insurance can be cheap and easy to obtain. With a bad credit rating, insurance suddenly becomes more difficult and expensive to get.

The link between a customer’s credit rating and insurance has become more prevalent over the last couple of decades, as insurance companies have tried to use a person’s credit score as a gauge for their reliability. With a better credit rating, insurance companies believe the customer will be less likely to engage in dangerous activity, pose any kind of risk or fail to make payments on their insurance policies. Conversely, a negative credit rating, insurance companies believe, means the customer may present a greater risk and could be more likely to be involved in incidents like car crashes. As a result, if they see what they view as a negative credit rating, insurance companies may require a higher deductible, higher rates and may even deny coverage to a customer they would normally take on if they had not reviewed their credit rating.

Some insurance companies have made it a policy to require prospective clients for home, auto or life insurance to fill out a credit check before sitting down and laying out a policy with them. As soon as they review the credit rating, insurance company agents will then lay out the policy they think presents them with the least risk, while providing some level of coverage for the client. In some cases, that coverage is less for people with poorer credit ratings—even though they may have a solid work history and have a clean driving record—than it is for someone with a strong credit score.

The link between a consumer’s credit rating and insurance has caught the ire of many consumer advocates and has begun to be felt in politics as well. The link between credit ratings and insurance coverage has started to be investigated by state and federal legislatures, leading to the banning of the practice in some states. As efforts to ban it pick up speed, the link between a credit rating and insurance may vanish entirely.