Looking for an insurance policy? Plenty of insurance providers can help, even if you have a low credit score. Knowing what to look for can help you save thousands of dollars over your lifetime. A little bit of research can free up space in your budget, and the insights from this article will help you find the best insurance for low credit scores and other financial needs.
How your credit score can impact your insurance premiums
Most insurance companies look at your credit score to assess premiums. Your credit score is a snapshot of your ability to manage debt and other financial obligations. A low credit score can result in a higher premium because the insurance company is taking on more risk. There are also studies that indicate consumers with low credit scores use their insurance policies more often than consumers with high credit scores. Raising your credit score before getting insurance can help you save money, and you can renegotiate premiums in the future, but some people need insurance right now.
How to find the best insurance options for low credit scores
If you need insurance right now, you have several choices to consider. Knowing how to narrow down your list of insurers can help you find the right policy, even if you have a low credit score.
Understand the different types of insurance
Consumers can select from numerous types of insurance policies. If it’s not in the marketplace, you might find an insurance company that can create a custom policy for your needs. The three major insurance policies are health, auto, and homeowners insurance. These policies are legally required for most people. You can also get liability insurance, a policy that isn’t based on credit scores. Most states require liability insurance if you register a vehicle in the state. It protects you from financial losses during an accident or an incident that injures someone or causes property damage.
Consider a high-deductible policy
A high-deductible policy can become expensive if you need to use the insurance policy, but monthly payments for this policy are lower than the other choices. A deductible is the out-of-pocket cash you have to pay for the insurance policy to take effect. You have to pay the deductible before the insurance company covers expenses. A lower deductible increases the cost of your premiums because it’s riskier for the insurer. A high deductible, although risky, can lower monthly premiums and help people with lower credit scores.
Opt for less coverage
People with low credit scores may not be able to get the best coverage for their needs. Insurance companies may offer less comprehensive coverage, but the premiums are lower. However, a low credit score can raise your premium. The amount of coverage you walk away from determines how much the reduced coverage compensates for a low credit score.
Compare insurance providers and their quotes
Requesting quotes from multiple insurance providers will help you gauge the competition. You can compare plans based on their premiums, deductibles, and other components. Filling out forms on insurers’ websites and requesting free quotes will not hurt your credit score. Insurers only conduct a soft credit pull, which has no impact on your credit score. Getting several quotes can help you save money and help you clarify what you want in an insurance policy.
Compare costs and coverage options
It’s easy to compare costs and stop at that point. The cheapest insurance policy may look good, but poor coverage can offset the advantages of a low price. Remember, you may have to use the insurance policy. Cheap premiums won’t do much good if you get involved in a car accident and can’t afford the deductible or don’t have coverage for your situation.
Read reviews
When looking for the best insurance option for people with low credit scores, it is important to read company and policy reviews. Every insurance company will brag about being the best, but reviews provide a more accurate depiction of each company. You can discover a company’s strengths and weaknesses based on reviews from current and former policyholders. Reading reviews is better than going in blind and not knowing whether the insurer is sincere or not.
Look into insurance discounts
Some insurance companies offer time-sensitive discounts to encourage more people to work with them. These discounts can help you save money on initial premium payments or get additional coverage. You can also earn discounts for good behavior. Some insurers trim off a portion of premium payments if you don’t get into any accidents for three to five years.
Work toward improving your credit score
A higher credit score gives you more choices. You get access to better insurance policies and lower premiums. The choices also extend beyond insurance premiums. You can get better loans and lower interest rates, a combination that can help you save a lot of money. Paying bills on time and paying off existing debt will go a long way.
You should also avoid using your credit lines as this will improve your credit utilization ratio, a metric that makes up 30% of your credit score. If you have a $5,000 credit limit and owe $1,000, you have a 20% credit utilization ratio. Any utilization ratio below 30% is good for your credit score, but it’s optimal to get this number below 10%. Monitoring your credit score and treating it like a long-term journey can help you experience gradual gains that translate into better insurance policies.
Re-evaluate your insurance every year
You don’t have to stick with the same insurance plan every year. If your credit score increases this year, you can get quotes for better insurance policies next year. You can also negotiate with your current provider to see whether they will lower the premium payments or provide better coverage.
Getting Better Insurance
If you have a low credit score, you can still get an insurance policy. You might have to contend with a higher premium or less coverage in the beginning, but if you improve your score, you can get a better plan next year. Policyholders should always look for options while strengthening their finances. You don’t have to stick with the same insurance provider if better choices are available.
FAQ
Can you get car insurance with a credit score of 500?
You can get a car insurance policy with a 500 credit score. However, consumers with 500 credit scores get higher premiums.
Can you be turned down for insurance because of your credit score?
You can be turned down for insurance because of a low credit score. Some insurers work with low-credit consumers but charge higher premiums.
Does insurance need a credit score?
Insurance companies will look at your credit score when determining premiums. Consumers with lower credit scores are riskier for insurers, and this can result in a higher premium.
