How does my credit score affect my auto insurance premium?


If you are well-to-do, pay your bills, credit card and bank loan payments on time and have a good credit record, then you have nothing to worry about. However, if you are struggling financially, have debts and are late with payments, auto insurance companies are likely to make it hard for you to get a car insurance policy.

Insurance credit score is a very important rating factor in the process of auto insurance underwriting. According to auto insurers, it indicates the possibility of an individual to make an auto insurance claim.

Auto insurance companies justify higher premiums for people with lower and poorer credit records, with actuarial statistics. Recent statistical date has shown that people with poor credit histories tend to get involved in more accidents, and hence, file more claims, than drivers with good credit records. Since premiums are based on where an individual insured stands within the actuarial statistics, auto insurance premiums for people with poor insurance credit scores tend to be higher.

Insolvency can result in doubling your premiums or even cancellation of your auto insurance policy, regardless of your driving record and other factors related to your behavior behind the wheel. Some people might think this is not fair, but insurers take your financial situation as an indicator of your general responsibility, or put in a nutshell, if you don't know how to take care of your finances, you are more likely to be negligent on the road.

A lot of critics of the auto insurance credit scoring system argue that it makes car insurance unaffordable for the working class people most of whom drive with little or no insurance because of the prohibitively high auto insurance premiums. This could have a financially devastating impact on the poor drivers themselves but also on other motorists who might not receive adequate compensation if hit by an uninsured or an underinsured driver.

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