Your credit score doesn’t have a direct effect on your life insurance premiums. However, when you apply for life insurance, insurers will do a soft inquiry of your credit report and the same factors that hurt your credit score can also hurt your options for life insurance coverage.
The insurance company will use your financial history to calculate an insurance score for you, and if you’ve filed for bankruptcy, regularly miss credit card payments, or have a history of driving violations, you could face higher premiums or application rejections.
How does my credit score affect my life insurance?
Your credit score doesn’t directly affect your life insurance application, but the details of your financial history — like bankruptcy or large credit balances — will impact your insurance score. Your insurance score is an internal metric that the insurer uses to evaluate your overall financial risk.
If the insurer determines that you have a bad insurance score, you could pay more in premiums, or in some cases, have your application declined. Each insurer generates the score differently, and since it’s an internal metric, you can’t look up your insurance score like you can a credit score.
Generally speaking, you’ll have a better insurance score if you:
Pay loans and credit cards on time
Don’t have a high amount of outstanding debt
Have a longer credit history
Haven’t submitted many recent requests for new lines of credit
Have a varied mix of credit.
In addition to your insurance score, the insurer will consider your age, sex, and other personal details to evaluate your risk and set the premiums for your policy.
Red flags insurers look for in your credit report
Even though your credit score won’t directly affect your life insurance application, certain details from your credit report can indicate that you might be a financial risk to your provider, such as:
Carrying large credit card balances
High percentage of credit card use
Late or missing debt payments
Every insurance company weighs these factors in your life insurance application differently. For example, all insurers have rules about bankruptcy.
Some insurers may require that any bankruptcy be discharged for 12 to 24 months before you can purchase a policy at all.
Others may see former bankruptcies on your report and simply offer you a higher premium.
If you have bankruptcies on your report or a more complex credit history, an independent insurance agent or broker can help you find the best insurance company for you.
At Policygenius, our experts are licensed in all 50 states and can walk you through the entire life insurance buying process while offering transparent, unbiased advice.
Other reports that impact your life insurance
Your credit report and insurance score are just two of the many factors that influence your life insurance premiums.
Life insurance companies want to determine the overall risk of insuring you — in other words, how likely you are to die while your policy is active. They’ll also consider:
Criminal records: The type of crime you committed matters. Misdemeanors won’t be as problematic, but you usually need to wait for felony charges to be dismissed, be out of jail, or off probation for at least 12 months to qualify for coverage. Multiple crimes on your record will also raise rates. Be ready to answer questions about your criminal history during the life insurance application process.
LexisNexis risk scores: LexisNexis aggregates public information about you that might raise concerns for an insurer. The company assigns you a risk score based on that public data. Insurers review the score for any details previous reports didn’t reveal.
Medical Information Bureau (MIB) report: Your MIB report contains details about any past insurance applications you’ve submitted. Insurers use the MIB to confirm your health information and look for red flags like previous application denials due to fraud.
Medical records: In addition to attending physician statements (APS) from your current doctors, insurers may also request records from any of your previous doctors to learn more about your health history.
Motor vehicle report: If you have DWIs or reckless driving charges, some insurers may refuse to offer you coverage. If you have multiple moving violations on your motor vehicle report, the insurer may raise your premiums. Accidents and auto insurance claims may also affect your insurance score.
Prescription drug history: The medicines you take, as well as the dosage and length of use, give insurers information about your past and present health conditions and their severity.
Even though your credit score itself doesn’t impact how much your pay for life insurance, the particulars of your credit report and overall financial health will.
In general, any indications of risk — whether medical or financial — lead to higher premiums, while predictable health, finances, and hobbies will earn you more affordable rates.
An independent insurance agent can help you find a policy that fits your needs, even if you think your financial history may present some risk factors.