How Your Credit May Affect Your Life Insurance Premiums
Does your credit history partly determine the cost of your life insurance?
It may. The potential for such a relationship may surprise you - and the relationship is not without controversy.
Some insurers believe a good credit history implies several things
Many insurance providers believe a strong credit history is characteristic of a consumer who is mature and routinely lives up to financial responsibilities. A bankruptcy on your record may lead to increased premiums.1
Other types of data may also be evaluated
In addition to credit history, insurance companies may also look at a consumer's driving record, criminal history, use of prescription medicines, and occupation. All this may affect life insurance coverage and premiums.1
Why are life insurance providers interested in all this information?
They want to make their business models more efficient. Insurance providers know that life insurance underwriting usually takes weeks or months and includes a medical exam. They believe that by basing it on partially predictive models, insurers remove a psychological hurdle that stands in the way of some policy sales. This sort of underwriting can take as little as 48 hours.2
So, yes, your credit history may affect what you pay for life insurance
While it may not be a prime factor, it does exert an influence. That is another good reason to keep your credit score high.
1. Nerdwallet, April 29, 2022
2. Investopedia.com, April 24, 2022
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