Your credit can determine what job you land, the type of home you can afford, the car you ride and insurance rates you get. That’s why having bad credit can have such a strong impact on your life. Now when it comes to insurance you may have heard or experienced an auto or home insurance company giving someone a higher rate on their policy or even choosing not to offer a policy at all. The majority of auto and home companies will use your credit score to determine the likelihood of you filing a claim with them. So if you have bad credit then you can expect to get penalized. Typically a bad credit can raise your premiums from 10% to 30%, which is a lot considering they only use credit as a determining factor. When it comes to life insurance underwriting your credit might not have the same weight as it does for other insurance products.
Life Insurance and Your Credit Score
If you have bad credit and are wondering how it will reflect on your life insurance application. Well, you shouldn’t worry that much unless you have certain discrepancies on your report. When it comes to life insurance your credit is really irrelevant. Instead, the company will primarily focus on your overall health such as your build, medical conditions, bad habits, and even lifestyle choices. They will also pull your motor vehicle report to see if you are a safe driver. You will also be asked about family history of certain illnesses. By now you may be quite clear on the fact that they simply won’t use a bad score against you. Now that doesn’t mean the life insurance company won’t pull a credit report on you, it’s just that they won’t increase rates on your policy unlike the other types of insurance coverages.
So why would the life insurance carriers pull your credit if they don’t use it to determine your rate? Well, simply because they can see other discrepancies and just want to have multiple references for cross-checking purposes. Life insurance companies use a very large amount of data to determine each individual’s risk, so they may check your credit report for additional information based on employment history or to see if you have a bankruptcy. Now, having a recent bankruptcy on your report can make a life insurance purchase more difficult.
Now, some carriers will give you a higher rate if you have bad credit since they are evaluating your overall character and credit score is typically a factor. Even if a carrier doesn’t use your credit history for evaluation they will still request to check it since they want to look for bankruptcies.
If you are looking to buy life insurance soon and have a low credit score, you might consider taking action to improve your score first. Here’s a credit-building guide I’ve found useful.
Life Insurance and Bankruptcy
Although bad credit is no problem with the majority of the companies, having a bankruptcy can increase your rates or require your application to be postponed. So if you define bad credit as a bankruptcy, then you may be very well quite affected. That is why there is a question regarding bankruptcy on life insurance applications. Applicants with bankruptcies are considered to be more of a risk for the life insurance companies and that is why they may offer higher rates. Typically a bankruptcy will be considered for underwriting purposes if it happened within the last 10 years which varies from company to company. For anyone currently going through a bankruptcy, life insurance may not be accessible and you will have to wait for it to be discharged.
So to conclude, bad credit should not stop you from buying a life insurance policy and you are at the right place to buy a policy. Here at InsureChance, we work with over 60 different companies, which gives us a unique ability to save you a lot of money. Life insurance rates are fixed by the law, so lets us help you find the most affordable life insurance policy. Regardless if you want a term policy, permanent life insurance or life insurance without an exam, you can compare quotes instantly without having to provide any personal information. The cool boxes on your right will lead you to a quote engine for a product that better fits your needs. If you have a bankruptcy, then you may want to speak to one of our experienced agents via chat or phone. Well, thanks a bunch for reading our article, please drop some comments below to let us know how we did.
Does Life Insurance Affect your Credit Score?
Life Insurance will not affect your credit score since it is not a loan. You’re simply paying for coverage which will end if you stop paying for the policy or simply cancel it.
Will a life insurance application count as an inquiry on your report?
Life Insurance application is a soft check on your report so it should not impact your report as a traditional loan application.
Work with Us!
If your credit is below average or you have serious discrepancies like bankruptcies then you need to work with an experienced agency that will help you get the best rate. Here at InsureChance, we work with over 60 top rated life insurance companies to help you get the most affordable rate. Not all life insurance companies will look at your bad credit the same, so the key is working with the right companies. In addition to working with the right carriers, you want to make sure that your agent drafts a nice cover letter to drop on top of your application to help improve your chances of getting approved with a more competitive rate! At the end of the day, you shouldn’t have to worry about any of the application process if you work with the right agency so feel free to browse the marketplace with our quoter or call us at 888.492.1967.
