III your Credit and Insurance

What does my credit rating have to do with purchasing insurance?

Credit scores are based on an analysis of an individual’s credit history. Insurers often generate a numerical ranking based on a person’s credit history, known as an “insurance score,” when underwriting and setting the rates for insurance policies. Actuarial studies show that how a person manages his or her financial affairs, which is what an insurance score indicates, is a good predictor of insurance claims. Insurance scores are used to help insurers differentiate between lower and higher insurance risks and thus charge a premium equal to the risk they are assuming. Statistically, people who have a poor insurance score are more likely to file a claim.

Your credit history can work for you or against you. Your proven ability to manage your money and meet your financial obligations is an indication of your maturity and stability and can open many doors. Prospective employers, landlords, lenders and even your insurance company view a strong credit history as a positive sign that you will meet your obligations and responsibilities to them as well. A poor credit history could result in not getting that apartment or dream job, and paying more for insurance coverage and higher interest rates on your mortgage and other loans.