Auto Insurance Premiums Tied to Credit Score
Auto insurance is designed to cover the risk of physical damage to a car or any insured vehicle. The premium rates of auto insurance are based on many factors such as the age of the driver, his driving history, and the location of driving. Many insurance companies also offer discounted premiums based on these factors. Some states of United States require a motorcycle owner to carry some minimum liability insurance where the owner pays insurers a monthly fee or insurance premium.
Insurance score or insurance credit score is a point system based on selected credit report characteristics. Insurance companies use these points for underwriting decisions and determining charges for premiums. Credit scores are generally applied in homeowners and automobile insurance policies.
Credit scores have the ability to qualify a car loan or how high the interest rate on credit card has. One of the biggest mistakes every people make is when their credit score is tanking. If a person missed any one payment even to his credit card, then it will catch the eyes of an insurer. To protect themselves, they charge more money. A construction risk insurance specialist who owns HM Risk Group in Austin, Texas says that people with poor credit are also more likely to file a claim. According to one research, stable people face fewer accidents than those who are financially stressed. Higher premium charges in expectancy of violations, accidents of future claims.
A credit score is one of the eight factors in determining premiums. The least seven factors are license term, gender, where you live, how you use your car, usage of annual mileage, the car’s cost, and driving record of a driver. And much more was there before few decades like a level of education, occupation, etc. that determines credit score rates.
Most of the insurance companies normally use the seven general factors to determine premium rates for policy; therefore it is important for car drivers to ask an auto insurance company if they use any income proxy rating factors. As per research and report, credit scores, education, and occupation can increase rates up to 200% within the same industry. People may find such health insurance by shopping around or searching online for a suitable policy.
Many people have commented on the use of credit scores because they said that insurance companies are using credit scores in an unfair way. Many of them also not notifying consumers that their credit is coming into play when determining premiums.
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