Will I be required to have my credit checked when buying life insurance?

For most insurance companies, your credit score is an important factor in determining what your premiums will be. Life insurance is no different, with your credit score, current health, and age, all playing a significant role in setting the amount you pay for coverage. Your credit score alone is only one factor among many, but weighs rather heavily, and people with a credit score above 600 will pay quite a bit less than someone with a lower score.

The reason that your credit score plays such an important role is that insurance companies use that score as an indicator of how well you can be expected to make your premium payments. If you have a high credit score, it shows the insurance company that you take your financial standing seriously, pay your bills on time and make reasonable efforts to stay on top of things economically. Because they run less of a risk of you defaulting with a high credit score, they are able to charge lower premiums.

Think of a credit check as the financial equivalent to a medical exam. Just as most life insurance policies will require a medical exam to know what condition your health is in, the insurer also requires a credit check to determine what your financial health looks like. Scoring below average on either test will not necessarily mean you cannot get coverage, but scoring below average in either test will mean your rates are a little higher. This is how the insurance company compensates for the increased risk.

You can get final expense insurance without a medical exam or a credit check. This type of life insurance is generally limited to relatively small values, and is often written to pay exclusively to a funeral home or director. This type of insurance does not allow you to leave money for your spouse or other loved ones, acting solely as a method to pay for the funeral, burial plot, and other associated final expenses. It is not the most beneficial type of life insurance, but it does take the financial strain off your family during their time of mourning.

If you are trying to get some other type of policy, such as a whole or universal life policy, the best suggestion is to bring your credit score up as much as you can before you apply. Request a copy of your credit report and scour it for errors. If they are found, contact the credit agency you received the report from, and they will tell you how to proceed with the dispute.