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Does Credit Score Affect Life Insurance Premiums?

May 14, 2020
Our goal is to educate and advise on life insurance options, so you can feel confident in making the right choice, whether that’s through Quotacy or somewhere else. To ensure we provide accurate and trustworthy information, our writers follow strict editorial standards.

Does credit score affect life insurance? First, we need to differentiate from two different scores with similar names: your credit score and your credit-based insurance score. Your credit score is simply a snapshot of your credit at one point in time. Your credit-based insurance score gives a broader look at your credit history. It can help an insurance company determine your financial risk.

Your credit-based insurance score is based on data such as:

  • Payment history
  • Bankruptcies
  • Amount of credit utilized
  • Amount and types of accounts
  • Length of credit history
  • Outstanding debt amounts
  • Debt ratios
  • Age of accounts
  • New applications for credit
  • Types of credit in use

Your credit score is based on:

  • Payment history
  • Amounts owed
  • Length of credit history
  • Credit mix
  • New credit

Using your credit-based insurance score during the evaluation process of your application—a process called underwriting—has become routine for both auto and homeowners insurance. This score predicts the likelihood of you becoming involved in a future accident or insurance claim. Your credit-based insurance score is not used to determine life insurance rates, however.

And while your regular old credit score also is not directly documented during the life insurance underwriting process, it is used in the calculations of other reports and records that life insurance underwriters do use. So, in an indirect way, your life insurance premiums can be affected by your credit score.

It’s not a black and white situation. Here we’ll shed some light on some of the reports and records that life insurance underwriters use to determine your premium and how your credit score may or may not play into them.

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Personal Reports and Records Life Insurance Companies May Use

Let’s review the common reports and records the life insurance underwriters pull to determine your life insurance premiums:

  • Credit report
  • Medical Information Bureau (MIB ) report
  • LexisNexis risk score
  • Criminal and driving history
  • Prescription drug history

Credit Report and Life Insurance

Did you know your credit report doesn’t even show your credit score? Your credit report is a history of your activities that affect credit. Your credit score is a calculation of these activities.

Life insurance companies want to know if you have ever declared bankruptcy. Your credit score won’t say this, but your credit report will. It is typical for the insurance company to make a soft credit inquiry (don’t worry, a soft credit pull won’t affect your credit score.)

A history of bankruptcy matters to life insurance companies for two reasons.

  • With a more recent bankruptcy and more fragile financial situation, there could be greater pressure to obtain life insurance with the belief that premature death would relieve the financial pressure on the family or business.
  • The instability of a financial situation can also hinder the insured individual’s ability to make future premium payments—causing the policy to lapse and coverage to be terminated.

Additional things to know regarding life insurance and your credit report: if you can’t pay your policy premiums and it lapses, it won’t affect your credit score. If you have a permanent life insurance policy and take out a policy loan, this loan is not reported to the bureau. If you are applying for a personal loan, however, a permanent life insurance policy is considered an asset due to its cash value and may even help you get approved.

Medical Information Bureau and Life Insurance

MIB’s mission is to uncover errors, omissions, and misrepresentations on insurance applications. When you apply for life insurance, the insurance company pulls your Medical Information Bureau (MIB) record. This record includes information that you previously gave on any prior life insurance applications, if you had any adverse results on a life insurance medical exam, relevant medical information from an applicant’s doctors, and DMV information.

This information is coded and only the life insurance underwriters can read it. The MIB does not contain actual medical records, just information to help prevent insurance fraud. For example, if your liver enzymes were abnormal during an exam, but you claim on your current life insurance application that you don’t drink alcohol, the insurance company will investigate this further to ensure you aren’t lying on your application in order to get cheaper premiums.

LexisNexis and Life Insurance

LexisNexis is a massive online data source and aggregator. One branch of this company specifically helps life insurance underwriters determine the overall risk of an application. They use a proprietary algorithm to establish its own risk score. To calculate this numerical score, it uses several data points including the life insurance applicant’s credit score, driving history, and other data derived from public records. So, in this instance, your credit score may indirectly affect your life insurance premium.

Many life insurance companies use the LexisNexis risk score to cut down the individual reports they would otherwise need to run. However, there are life insurance companies who opt to use their own algorithms to determine risk scores when underwriting their applicants.

Criminal and Driving Records

When a person applies for life insurance, the insurance company will request a Motor Vehicle Record (or MVR, for short) which will contain information about several different types of vehicle-related incidents. Life insurance companies are all about evaluating risk, so your driving record can affect your life insurance premiums.

If you have a pattern of being reckless behind the wheel, your life insurance premiums will reflect this extra risk the insurance company takes on. If your record includes too many violations or they happened very recently, there is a chance you may not even be approved for coverage until more time has passed.

Your criminal record will affect your premiums in a similar way. If you have a criminal record, you probably fall into one of four categories: you’re currently incarcerated, you’re currently on parole, you’re currently on probation, or you’ve completed your full sentence and have your freedom back.

Individuals currently in prison cannot get approved for life insurance. The life insurance company will not accept this level of risk.

For individuals on parole, most insurance companies will wait until at least five years have passed before offering coverage. For individuals on probation (in lieu of going to jail), some will offer coverage during the period depending on the individual case. But most will postpone until the applicant’s probationary period is over.

If you are out of jail and have completed all post-requirements with flying colors, your chances of getting approved for life insurance are better. However, depending on your specific crime, there is a chance you may not be able to obtain traditional life insurance coverage. For example, individuals with patterns of multiple offenses or those with histories of alcoholism, drug abuse, or violent behavior will typically be declined for life insurance.

Don’t try to hide your criminal record or driving violations if you have them. Ordering up a background check is pretty standard when a life insurance company evaluates an application. Not to mention, both your criminal and driving histories have the tendency to pop up on other records and reports.

Prescription Record and Life Insurance

Life insurance companies will request medical prescription records of applicants during the underwriting process. This is referred to as an Rx check.

The medicines you take, as well as the dosage and length of use, can indicate past and present health issues and their severity. This helps underwriters determine your medical risk.

If you have a medical condition, it may affect your life insurance premiums depending on many factors. Does your condition have a direct effect on your mortality? The evaluation of an applicant’s health may include the following: a prescription check, life insurance medical exam, and ordering doctor records. But by no means does having a pre-existing medical condition mean you can’t get life insurance.

In general, the life insurance industry as a whole is trying to make the process of buying life insurance simpler and faster for people. Part of this strategy includes utilizing these records, reports, and risk scores in an efficient way. For example, if a life insurance medical exam is completed and all labs come back normal, the company may decide they don’t need to order doctor records.

To wrap up, your credit score has an indirect effect on your life insurance premiums. In the grand scheme of things, life insurance companies do want to know if you will be able to keep up with your life insurance premiums and make sure you aren’t over-insured, and your income and how responsible you are with loans, debt, and making payments are ways they can make these determinations. But, interestingly, your life insurance payments (or lack thereof) won’t affect your credit score.

Take the first step in buying life insurance by getting a life insurance quote today. You will not have to give away any personal information just to see price estimates. No reports will be ordered until after you officially apply. You can also rest assured Quotacy won’t sell any of your information, even if you decide not to accept coverage.


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