FREQUENTLY ASKED QUESTIONS

Nate from Yarmouth, ME Asks – “What financial information affects my car insurance rate?

Answer:

Your financial history and financial status plays a large role in helping auto insurers determine your “trustworthiness.”  Remember, insurance is a game of risk, and all insurance companies use complex algorithms to determine how much of a risk you will be to them.  Your financial profile will give insurers a crystal-ball to peer into to see how good of a customer you will be.  Here are some of the things they might look at:

Your Credit Score

Some auto insurance companies may require a credit score or a copy of your credit history before they can provide you with insurance because of the risk involved in offering such financial protection. However, not all auto insurance companies require credit scores, and some states have even banned the checking of credit scores when applying for auto insurance. Because a credit score provides a quick window into one’s financial history, auto insurers generally would like to see these reports. So be sure to ask whether this is a requisite in obtaining insurance with any prospective auto insurer.

How Credit Scores can change or affect your auto insurance quotes

For many auto insurers, a consumer’s bad credit can impart the equivalence of unreliability when it comes to their monthly premiums. If a car insurer is concerned that you may be unable to make a long-term commitment, they may increase the monthly premium on your auto insurance in order to make up for that risk assessment.

Credit Scores and driving habits

If you are reckless with your finances, an auto insurer may come to the conclusion that you may also be reckless on the road. This can adversely affect the rates you pay as well as the types of coverage you are eligible for.

No Credit? No Problem.

Look into the laws of your state as to whether insurers are allowed to look at your Credit Score when assessing the right plan for your vehicle. Bad credit should not impede your access to auto insurance. Look at a variety of insurers as to see if they check Credit Scores and make sure to provide as much detailed information as possible so that your insurer can get a clear look at who you are, beyond just the numbers of a Credit Score

What other financial information affects my car insurance rate?

Total Household Salary

In order to determine an appropriate plan that works within your budget, insurers will ask you to provide a household salary figure so that they can make a quick assessment of your current financial status. Because premiums are required on a month-by-month basis, your household salary is a simple way to determine whether your finances can support these payments.

Status of Health Insurance

The type and amount of health insurance is required for two reasons: first, health insurance provides a snapshot of your recent insurance history by proving whether you’ve made a commitment to an insurer by paying a monthly premium to your health insurance provider.

The second reason you provide your health insurance status is because health insurance can lower your auto insurance premiums by alleviating the risks of your auto insurer in the case of an accident.

Total value of bank accounts, CD’s stocks and bonds

Auto insurers often require you answer this question, but having these types of assets will not affect whether you receive auto insurance or not. Rather, CD’s, stocks and bonds are further indicators of your overall financial health, and these factors are always taken into account in determining the proper insurance plan for your vehicle.

Questions about equity on your car or house

The amount of equity on your car or house gives providers a roundabout view of your credit worthiness and the risk you pose to their insurance programs. Persons with low equity on their car or house are generally required to pay higher premiums due to the higher risk associated with such investments.