How Much Does Credit Affect Home Insurance Premiums??

When you bought your home, your probably had to undergo a comprehensive credit check, particularly if you financed your home with a mortgage. However, one part of the home-buying process where you will likely have to undergo a second credit check is when it comes to your homeowners insurance application.

Most home insurance companies, look into a client’s background before quoting them a price for their policy. This will likely include a credit check. Credit health is an indicator of someone’s overall financial wellness. To insurers, therefore, it is a sign of how reliable a client is going to be when it comes to filing claims, paying for their plan and maintaining their coverage overall.

Consider more closely the importance of credit when it comes to home insurance premiums.

How Credit Affects Insurance Rates

When your prospective home insurance carrier begins to work on your quote, they will take a look at your credit history. This will show them existing lines of credit (loans, credit cards, car financing, etc.), debts, and your credit score overall.  

Typically, individuals with higher credit scores will be offered lower premiums. The reason for this is because a higher credit rating indicates that the driver has better financial stability overall. To insurers, this means several benefits to investing in you as a customer.

First, those with good credit often are less likely to file claims on their policies. Therefore, they are less likely to cost the insurer a significant amount of money. As a result, the insurer might expect less of a cost investment for them.  

Additionally, a high credit score is an indicator that you are a good manager of money. You are someone who pays your bills on time and are therefore much less likely to miss an insurance payment. As a result, you have a lower likelihood of letting your policy lapse due to nonpayment. Insurers therefore might not have to worry about charging you more, because they can, in essence, trust you.

When it comes to your homeowners insurance, a good credit score and an affordable premium are of course highly advantageous. By having lower premiums you will establish yourself as a reliable customer when it comes to making insurance payments. You therefore guarantee for yourself that you always have coverage simply because you continue to pay for it. Overall, this increases your own security by easing your financial burden overall.

Of course, credit score is not the only factor that influences your homeowners insurance premium. Still, it is one factor that you might be able to directly control, simply by committing to your own financial discipline.