Can Bad Credit Affect Life Insurance Premiums?

Can Bad Credit Affect Life Insurance Premiums?

Can bad credit affect life insurance premiums? The short answer is probably. When you are going through underwriting in the life insurance process, there are many factors considered in order to finalize your premiums or payments. The underwriters need to know your age, sex, state of residence, occupation, health history, current health status, medications taken, family health history, life style, income, net worth and foreign travel plans. Certainly they will want to know your credit history. But not all life insurance carriers will pull your FICO score.

Just because an underwriter will not pull your credit score, doesn’t mean they are not looking into your credit. There are other ways to see if a person is a credit risk. For example, an underwriter may look at your employment history for long gaps of unemployment. This would suggest payment history issues. The same is true with medical history. Bad credit suggests added stress to the applicant. Stress causing health issues that may or may not have been diagnosed. It could also increase the possibility of someone possibly doing themselves harm.

The biggest factor as to why a life insurance company is interested in credit history is the applicant’s ability to continually pay their premiums. There is no reason to issue a life insurance policy on a person that cannot afford the cost. The key to any life insurance policy is to keep it long term and have the death benefits paid to the beneficiary.

Also noteworthy is if an applicant is filing bankruptcy. Whether chapter 7 or chapter 13, in all most all cases the application will be postponed for a period of time until it is deemed the applicant has recovered from the bankruptcy and the premiums can be reasonably paid on an ongoing basis. If a bankruptcy is looming in your future and life insurance is needed, a person should consider securing an affordable life insurance policy prior to filing a bankruptcy to avoid a difficult situation.

These are the main reasons that bad credit affect life insurance premiums and the consumer should be aware.

“If you don’t have the money management skills yet, using a debit card will ensure you don’t overspend and rack up debt on a credit card.”— T. Harv Eker

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Tim Wilhoit is owner/principal of Your Friend 4 Life Insurance Agency in Nashville, TN. He is a family man, father of 3, grandfather of 1, entrepreneur, insurance agent, life insurance broker, employee benefit specialist, salesman, sales trainer, recruiter, public speaker, blogger, author and team leader with over 29 years of experience in sales and marketing in the insurance and beverage industries.

2 Responses to Can Bad Credit Affect Life Insurance Premiums?

  • Thank you for sharing this article. We were about to purchase life insurance and were wondering about this. You have been very helpful, thank you!

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