How the Insurance Industry and Consumer Debt May Clash

While the amount of debt that you carry may not seem to have a high correlation with filing an insurance claim, the insurance industry begs to differ. In fact, the industry that has been built around compensating consumers for various losses has essentially found ways of protecting itself from applicants who are more likely to file a coverage claim.

One way of doing so involves the calculation of an insurance score for consumers who apply for coverage. These insurance scores correlate highly with one’s credit score. Therefore, a person who has a low credit score is also likely to possess a low insurance score – resulting in the payment of higher premiums being charged for coverage.

Perhaps you’re wanting to know how many life insurance companies there are who can offer you coverage. If so, we can help.

How Can Your Insurance Score Be Improved?

There are several ways in which you can go about increasing your insurance score. One of the first steps that should be taken is to obtain a copy of your credit report and history. By law, consumers are allowed to obtain one free credit report each year.

Once you have your credit report in hand, read through all of the information carefully, ensuring that there are no errors or missing facts. In doing so, you will be able to see where you have deficiencies in your credit report – which will likely in turn, lower your overall credit score.

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Some of the ways in which you can start to improve your credit score include:

  • Paying all bills on time. Payments that show up as being delinquent, as well as any reported collections, will show up as a negative on your credit report, and subsequently also on your insurance score. Therefore, by making a concentrated effort to pay bills on time, you are likely to soon see a rise in your credit and insurance scores.
  • Keeping your credit balances low. Keeping credit balances low is essential to improving your credit and insurance scores. This is especially the case when it pertains to unsecured consumer debt such as credit card balances. By lowering – or ideally, eliminating – your credit card debt, you will see an improvement in your overall scores for both credit and insurance.
  • Only opening new credit accounts or loans as needed. While it is a good idea to have some established credit, having too many credit cards can actually count against both you and your insurance score. Therefore, only open new credit accounts or loans if they are really needed. It is important to note, however, that it is not a good idea to cancel credit cards – even if you are not currently using them. This is because the amount of available credit on each of your cards is combined to come up with the total amount of credit that you have available. By cancelling unused credit cards, you will essentially be lowering the total amount of credit that you have available, incurring a higher percentage of credit in use. A high percentage of in-use credit can count negatively against you when coming up with your total credit and insurance score figures.

How to Correct Errors on Your Insurance Score

If you determine that there is incorrect information that pertains to your insurance score, you can take steps to fix it. First, report the error to the credit bureau in which the incorrect information appears.

When consumers report such an error, the credit bureau is legally obligated to investigate the error and to subsequently respond to you within a 30 day period of time. When analyzing the error in your credit file, the credit bureau will need to contact the creditor or other organization that reported the information. Once that has been done successfully, the credit bureau should make the necessary corrections to your credit report.

The Bottom Line on the Insurance Industry and Consumer Debt

When it comes to obtaining a fair premium for insurance coverage, more and more insurers today are checking into how consumers deal with their credit and debt. It has been statistically shown that those consumers who possess a low credit score – and are therefore considered to deal negatively with their debt obligations – are also more likely to file insurance claims. This can be cause for those consumers paying a higher amount of premium for their insurance coverage.

The good news is that you can take steps to improve your insurance score – thus leading to the payment of lower insurance premiums. It may, however, take some time and effort in order to get your score to the level that you would like it to be. Once it is there, though, you will be well rewarded with lower insurance premiums on the coverage that you need to protect the assets you’ve worked hard for over time.

Maybe you have simple questions such as who has the cheapest life insurance or have health conditions and want to know if you can get life insurance with health issues? Let us answer your questions and help you get the coverage you deserve. There are many companies who offer low cost life insurance with no exam if this is your concern.


Susan Wright, CLU, ChFC, RHU, REBC, ADPA, CITRMS, CIPA has been in the insurance and financial field for over 27 years. Even with years of experience, she continues to create new resources for others. Everything from books to training material.

Susan received her MBA from St. Louis University and her BA from Michigan State University.

She has worked in several areas but excels in writing material for both finances and insurance. Her goal is to give professionals credibility and assist in streamlining the sales process.

She has written countless articles for a variety of websites.

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