Finance information has big influence on insurance applications for most consumers.
Insurance companies use credit and insurance information to determine the premium they can offer as well as other important factors. By understanding the process in which financial information is used, you can reduce misconceptions and understand your rights.
Is it possible for the insurance company to review your own credit and insurance information? According to federal law, it is legal for an insurance company to look at you finance information for a permissible purpose. While they have the right to check that information, this is only used for verification purposes and they also have to comply to state laws regarding using financial data of an applicant when it comes to underwriting.
Not all insurance companies ask for credit and insurance information but why do some ask for them anyways? Some companies agree that there is a link between stability and losses. They perceive people with more stability to maintain better financial credibility and be less at risk of losses and those who may not be deemed financially responsible might be asked to pay more premiums to offset the risks. If you have to undergo such a thing, make sure that you have reviewed the information prior to that so that you can be assured that all information is accurate and not erroneous. If the report has errors, have it fixed immediately.
Is requiring credit and insurance information a form of discrimination against those who earn in the lower income bracket? A credit report is just one factor to determine premiums and is not to be confused as a sole determinant for insurance. There are some people with low income who are very responsible with their finances while there are very rich people who have more debt. Being financially responsible does not mean being rich but being able to make use of whatever money you have for your future endeavors.
Financial information asked and required by insurance companies often is varied and the most common one used by insurance companies would have to be credit reports that highlight financial situation of the applicant. A credit score is also being widely used nowadays as part of their own scoring systems. Since the credit score is in a more quantifiable format, they can easily determine a range to know if the person is qualified or not for a specific premium. However, a credit report is a lot more detailed, making it more ideal for assessment and qualitative analysis, but can also be quantified based on the insurance company.
Often times, when credit and insurance information is requested, specific factors are considered such as major negative items, credit history length, open credit lines, type of credit, past payment history, home ownership, as well as outstanding debt. Such information will be collected and used to make a more effective assessment of the person and to determine if he or she is qualified to get a lower insurance premium. Such information can make or break an application so it would be best to review the data and ensure that they are accurate for more peace of mind.
Understand your responsibilities and rights as a consumer. We offer tips and methods to help you become more adept in understanding credit and insurance information and how to keep your finance information in good shape.
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