Does my credit score have any effect on my insurance premiums?
In general, your credit score has no direct effect on your insurance premiums. However, depending on your insurer, there are two circumstances in which your credit score will have an effect on your overall premiums paid:
- When you elect to pay your premiums on a month-to-month basis or opt for financing your premiums in some way. Your credit score comes into play here because it acts on your interest rate. Typically, someone with a lower credit score would incur a higher interest rate, meaning that their overall premiums paid at the end of the policy term would be higher.
- When your policy has a credit check provision. Some policies, such as Aviva's Ovation product in Canada, allow insurance applicants to consent to a soft credit check (which does not affect their credit scores). Based on that score, they can get a premium discount of up to 40%. This discount is offered because someone with good credit is seen to be more responsible and, therefore, a lower risk (see Your Credit Score and Your Insurance Premium to learn more). While I have not read other policy wordings that contain this provision, Aviva's mentions that a potential insured would not be denied coverage or incur a surcharge as a result of this soft credit check.
Given the massive savings to be had through a soft credit assessment, it is worth asking your broker if your policy has such an option (to find out what an insurance broker can do for you, see What Is an Insurance Broker?).
Written by Jacques Wong
Jacques grew up around the insurance industry and began actively participating in 2013. Since then, he has gotten a Level 2 license, won Insurance Council of BC awards in 2015 and 2020 for academic excellence in the insurance licensing courses. He educates insurance professionals through PNC Learning and as a Thought Leader at ReFrame Insurance.
In his day job as an insurance broker, he helps businesses with creative risk management solutions and strategic advice when it comes to insurance.
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