14 Nov Credit Score & Short-Term Insurance: a Surprising Connection

Did you know that credit scores can affect short-term insurance? That’s right, your credit history and score have been statistically proven to influence your risk profile, likeliness to claim, and premium. The higher your credit score, the lower your premium will likely be, and vice versa. Your payment history also influences your premium. Demonstrated financial responsibility shows you’re less likely to claim, which qualifies you for lower deductibles and premiums.

How Does Short-Term Insurance Work?

The basics of short-term insurance are this: insurers offer policies that typically last under a year to protect individuals against unforeseen events. Policies can cover cars (auto insurance), homes, and belongings (personal insurance), businesses (commercial insurance), your health (health insurance), and travel (travel insurance).

Key Terms

These are a few words you should know when discussing short-term insurance.

• Policy coverage: events insured against.
• Policy limits: maximum amount an insurer will pay.
• Deductibles: the amount the policyholder must pay out-of-pocket before the insurer starts paying.
• Premium: the monthly amount you’ll pay to maintain coverage.

When protecting the present, consider all of the above.

How Are Credit Scores and Short-Term Insurance Connected?

Now that you understand some of the key terms behind short-term insurance discussions, it’s time to outline the surprising connection between credit scores and short-term insurance.

Your Credit Score Indicates Risk

The higher your credit score, the more financial responsibility you’ve shown, which insurers correlate with a lower likelihood of filing claims. On the other hand, a lower credit score demonstrates you might have paid late, defaulted on payments, or have a high credit utilisation rate, which can make for higher premiums because of your supposed increased likelihood of claim filing.

Did you know that insurers use a special credit score called an “insurance score”? It accounts for credit utilisation rate, payment history, and credit account balances. These aspects have been statistically proven to determine the likelihood of claim filing and consumers’ risk profiles.

Policy Coverage

The lower your credit score, the less coverage you’re likely to get. You’re also more likely to have higher deductibles and premiums. Conversely, a higher credit score usually makes for higher coverage, and sometimes discounted premiums because of demonstrable financial responsibility.

How to Use Your Credit Score to Get Lower Premiums

One little-known fact is that policyholders can get a reduced premium by increasing their credit scores. You can do this by:

• Reducing your credit utilisation rate (how much credit you use compared to your total limit).
• Paying off your debts. Don’t pay them off completely or close your accounts. The length of your credit history is also a score determiner. Pay them off so that you are not perceived as overcommitted or burdened with a high DTI (debt-to-income ratio).
• Pay on time. The more you pay on time and in full, the more you’ll build a positive payment history, which will heighten your credit score.

You also have the right to dispute derogatory items on your credit report, like debt review, judgments, and other negative marks through credit clearance.

Get a free online credit check with Credit Boost.

Let Credit Boost help you get short-term insurance with comprehensive coverage, low deductibles, and a low premium. Contact us today for great short-term insurance or help to boost your credit. We would love to help you save money while being fully insured.