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  • How insurance companies use records to determine rates
  • January 17, 2014
  • how insurance companies rateBy

    When it comes to qualifying for life insurance, credit reports and driving records are two tools used by insurance companies to determine how a consumer is rated, but they are not the only tools used.

    The good news is that a poor credit score and a history of moving violations will not necessarily preclude you from finding life insurance, experts say, but it could cost you more.

    Jack Dewald, chairman of the board for the Life and Health Insurance Foundation for Education, says while a credit report may be used to verify the accuracy of an individual’s application, a driving record is used to determine any risky behavior by the applicant.

    “They will be checking for instances of issues with your driving record, to determine if you take chances while driving,” Dewald says.

    To get the preferred best rates, a consumer would need to have a clean driving record with no DUI’s, DWI’s, reckless driving charges, excessive speeding tickets or license suspensions.

    Cyber Drive Illinois said drivers caught under the influence and charged with a DUI are required to purchase high-risk insurance costing about $1,500 per year for three years total.

    The length of time a driving record needs to be clean will vary by company and by state. Typically, Dewald says, for an individual to be considered for the preferred rates he or she would have no DWI charges for at least five years, and any reckless driving charges or excessive speeding tickets for at least three years.

    Linda Lankowski, a member of the American Academy of Actuaries Life Products Committee, says insurers use information obtained from these reports to identify a pattern of abuse by a potential client.

    “For people with a good driving record, we assume they are nice stable people,” said  Lankowski. “Those are the kind of people insurance companies are comfortable insuring.”

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