Your credit history reveals information about how you handle your financial responsibilities, and your credit score is one of the major factors a bank relies on to determine how much interest you’ll pay on that loan you want. Increasingly, credit history is being factored into many more decisions about our lives including auto insurance, adoption, and employment. Yet, when it comes to life insurance, insurers may not look at this type of information the same way other industries do.
Keep in mind: underwriting guidelines vary from insurance company to company, and so we can’t speak to what each individual insurer will look at. For this, we’ll focus on the guidelines for the Haven Term policy, which is issued by our parent company MassMutual, and how credit attributes may be used to help flag if underwriters need to understand more about an applicant. During the application and underwriting process, your credit score is not used to determine premium pricing or eligibility. When you apply for a Haven Term policy, your credit info is only used to determine whether additional information is needed.
Why might life insurance companies check your credit?
During the underwriting process, many insurers analyze self-reported lifestyle and health information and pair it with third-party data sources that provide insights about your prescription history, past applications for life insurance, driving records, and criminal history.
Once a life insurance application is submitted, an insurer reviews these public records to determine if they need to ask follow-up questions to understand more about your financial or health picture. Your credit attributes, not your credit score, may be one of the things they will review in the underwriting process.
An example of a credit attribute that life insurance companies would look at is whether or not you have filed for bankruptcy. While for many people, bankruptcy can be a result of unfortunate events beyond their control, for others it can indicate poor decision-making or even be a red flag for medical problems because many bankruptcies are the result of medical bills.
Personal records that do impact life insurance premiums
While a life insurance company isn’t looking to see whether you have a balance on your credit card, there are other public records that can have an impact on eligibility and pricing.
DUI/DWI convictions, for example, are part of these public records and will show up in the underwriting process. Multiple convictions of drinking and driving can illustrate to an insurer a pattern of high-risk behavior that can ultimately increase mortality risk. The same can be said for having a criminal history.
Additionally, your prescription history will be reviewed and compared with the health information reported in the application. For example, at Haven Life, once an application is submitted, these public records are reviewed in real-time. If there are follow up questions on a prescription drug you have taken in the past, you’ll receive them in the same session.
When it comes to buying life insurance, for most people, your credit attributes are far less important than your age and health history. The amount of information reviewed by an insurer can be intimidating, but it’s important to understand that, generally, the less assumptions an insurer is making about your health and lifestyle choices, the more affordable and personalized-to-you the pricing will be.
If you’re shopping for coverage and worried about how your public records may impact your pricing or eligibility, reach out to our customer support team. They are happy to help you understand if it could either be an issue or slow down the approval process.
Finally, you can check with your state’s insurance department to find out your state’s laws on whether and how insurers can use your credit information in the underwriting process.
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Kimberly Rotter is an editor at Haven Life and a consumer credit and personal finance expert. She provides consumers with understandable, actionable information that can help them improve their financial and credit health.