A credit score is the consumer’s creditworthiness. When you’re borrowing a loan, renting an apartment, or applying for various rewards, your credit score is looked at. Also, your credit score plays a critical role when buying car insurance products. Car insurance companies typically consider your credit score and insurance history when working out your risk score. If you have bad credit, you’re likely to be subjected to high premium payments.
Not every car insurance company looks at your credit score when working out your premium payments. Some states like California, Washington, and Hawaii, prohibit the reliance on credit scores to calculate the risk score. However, most car insurance companies consider credit score improves accuracy in predicting risk.
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While some car insurance companies don’t consider your credit score, there are other values they may rely on when determining your premium payments. Car insurance companies have different formulas that help them minimize and avoid risk.
Common Car Insurance Questions You’ll Be Asked By Your Insurer
Auto insurance companies may require specific information from you to be able to work out your risk score. The following are some of the questions that auto insurers typically ask.
What is Your ZIP Code?
Where you live can affect the premium rates. If you operate within a city, your car is exposed to greater risks than if you operate within suburbs or in rural places, where the risks are minimal. Insurance companies look at the number and severity of auto insurance claims in a location when working out premium payments.
What Car Are You Insuring?
Your auto insurance company will need to know certain details about the car, like its year of make and model. You typically supply various documents to verify the data. The insurer assesses the claims belonging to various cars to calculate the risk score.
What is the Primary Use of Your Car?
The way that you use your car can determine the level of risks that you expose it to. Your insurer might want to know whether you use your car for commuting to and from work, business, or promotional work. Generally, if you use your car to deliver products to clients around the state, you attract a bigger premium than someone whose car is for traveling to and from work or school.
How Many Miles Do You Drive Annually?
Auto insurance companies want to know what distance your car covers every year. The risk score is high if the car covers great distances but low if it covers relatively short distances. Cars that cover huge distances typically attract huge premium payments.
Does Your Car Have Anti-theft Systems?
When you have an anti-theft system installed in your car, this is an indication that you are proactive about minimizing risks. Depending on the insurer, you can win discounts for having an anti-theft system in your car. The level of the discount can be determined by how your anti-theft system works. For instance, if your system can track down your car after a theft, the discount is bigger as opposed to if you have just an alarm system.
Who Owns the Car?
Auto insurance companies want to know whether the car is fully paid for, financed, or leased. You may also be required to submit supporting documents. If you have financed or leased the car, the auto insurance company might need you to buy collision and comprehensive coverage as they know that lenders require these policies. If the car is fully paid for, your legal obligation is to buy minimum insurance coverage.
What Is Your License Status?
Your insurer will need to know your license status when calculating your risk score. Is your license valid, suspended, revoked, expired, or a foreign license? Most auto insurance companies will need you to have a valid license. Holders of driver permits and foreign licenses typically experience difficulty in buying insurance.
What is Your Occupation?
Your insurer might need to know what you do for a living. Insurance companies look at the history of claims within certain occupations. Some jobs have fewer claims, while others have massive claims. Your insurer may require you to provide some proof of occupation to discourage distortion of facts. Certain occupations make you eligible for car insurance discounts.