Credit Scores and Insurance

Many insurers now include credit scores as one of many factors in the rating of insurance.   We've gathered a few key points regarding how credit reports and scores are being used in insurance and how you can check and improve your score.

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What do I need to know about credit reports and scores?

What is on my credit report and where does it come from?

In general, your report includes your name, address, employers and more specific information about your accounts such as date opened, credit limit or loan amount, balance and payment patterns during the past several years. The information provided on your report comes from companies with whom you do or have done business.

Should I check my credit report regularly?

Since your credit report plays an important role when you apply for any type of credit, it would be a good idea to know what is on your credit report before applying for credit. Because of this, we recommend you check your score annually.

What is a credit score?

A credit score is a number insurers use to help them during the underwriting process, in determining whether or not to provide you with insurance coverage. A score is developed using elements of your credit history. However, it is not stored as part of your credit history. Typically, it is generated at the time a request for a credit report is made. Therefore, your credit score changes as the elements in your credit report change.

How is the credit score used for insurance purposes?

A credit score is a number insurers use in developing the premium and it also is used to help them during the underwriting process. Many insurers will use the score to determine if your rating will be in a nonstandard-, standard- or preferred-rating tier. The better credit score you have, the better rates you could possibly have. Also, many insurers decide whether or not you are eligible for their insurance based upon your rating in combination with your driving history. A general rule of thumb is the higher the score, the better the score. A poor credit score with a poor driving record could determine whether or not an insurer will provide you with insurance coverage.

How can I raise my score?

While you can improve your future score, it is unlikely that any single action you take will have a large impact on your score immediately. That is because your score reflects credit patterns over time. There are things you can do now to improve your score in the future, such as:

• pay your bills on time—delinquent payments and collections can have a major negative impact on your score; and
• apply for new credit sparingly.

There is no single action that will raise your score. Each time a credit score is calculated, specific reasons are delivered along with the score. If you have received your score, you can ask for the reasons that came back with your score. These reasons, listed in order of importance, represent why your score was not higher. Addressing these reasons will most likely result in an improvement in your score.

How long is credit information kept?

Payment in full does not remove your payment history. The length of time information remains on your credit file is:

• credit and collection accounts—seven years from the date of last activity;
• courthouse records (judgments, liens and bankruptcies)—seven years from the date filed; Chapters 7 and 11 remain on file for 10 years from date filed;
• satisfied judgments—five years from date filed; and
• paid collections—five years from the date of last activity with original creditor

What if the credit report has errors?

If an error is detected on your credit report, you should notify all three credit bureaus of the error. The credit bureaus must re-investigate the disputed item.
The three national credit bureaus are:

• Equifax—(800) 685-1111;
• TransUnion—(800) 916-8800; and
• Experian—(888) 397-3742.

 Your Professional Insurance Agent … We want you to know about the insurance you're buying.

Vacation Plans and Your Insurance Coverage

The summer months of June, July and August are a popular time for vacations.  We get many questions from clients regarding how their insurance will cover various scenarios in regards to their vacation plans.  The following are a few popular questions and the answers to those questions!

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Answers to questions you may have before going on vacation

How can I secure my house or apartment while I'm away?

Create a lived-in look to deter burglars. Do this by stopping newspaper and mail deliveries; asking a neighbor to park a car in your driveway occasionally; and putting lights on a timer or asking a neighbor to turn lights on in the evening. Use a telephone answering machine or call forwarding to quiet ringing telephones. And, make sure all windows and doors are locked to make entry difficult for intruders.

If my home is burglarized or damaged by fire, are all of my possessions covered?

Under a standard homeowners insurance policy for a single-family home, the contents of the home normally are covered for at least 50 percent of the amount of insurance on the building ($50,000 contents coverage on a house insured for $100,000). A renters policy is written for a specified dollar amount, based on what you own, to cover the loss of personal belongings in your apartment. There are special limits of liability on certain items in certain situations, however. Typically, there is a $200 limit on money and $1,500 on securities, passports, tickets and stamps. There is generally a $1,500 limit on watercraft, trailers and outboard motors. For fine jewelry, furs and watches that are stolen, a usual limit of $1,500 is set. And, there is typically a $2,500 limit for theft of guns and a $2,500 limit on theft of silverware, goldware and pewterware.
A home inventory is important to have should you become the victim of a burglary or fire. The inventory is a list of your possessions, including makes, models and serial numbers. Photographs or a videotape of your belongings are other ways of recording what you own. These records should be kept in a safe place away from the house or apartment so they would not be lost in the event of fire.

What if the items I take with me on vacation are stolen?

Your belongings generally are covered by your homeowners or renters policy anywhere in the world, including items in storage facilities, suitcase contents and items lent to friends. Exceptions to this are items usually kept at another residence of yours, which then would be limited to the greater of $1,000 or 10 percent of the personal property limit shown on your policy (some restrictions also apply to theft). Typically, you would have another policy to cover all the eligible property at that location, including loss by theft.

We'll be traveling by car on vacation. Do you have any suggestions?

Check with our agency to make sure that your policy is up-to-date, and make sure the car is in good running condition. While traveling, be sure your passengers wear seat belts and young children ride in car seats at all times. Also, keep cameras, purses and other valuables with you while on vacation; never leave them in the car.

I plan to rent a car for this trip. Is it necessary to buy the insurance the rental agency sells?

It may not be. Prior to leaving for vacation, check with your professional insurance agent to determine if your personal auto insurance policy covers damage to a rented vehicle, as many policies do. You may want to contact your major credit-card company to ask if a rental car charged to that account is covered for damage. If you don't have one of these pre-existing coverages, it may be wise to purchase insurance from the rental agency.

Your Professional Insurance Agent … We want you to know about the insurance you're buying.