If you have been driving for a long time, you know that good auto insurance coverage is essential. Getting a quote from any of the major car insurance companies involves running a credit check. Underwriters use credit as one of the most important rating factors when determining auto insurance rates. This article will cover car insurance companies that do not use credit scores while setting your insurance premium.
Does credit score affect car insurance?
Insurance companies view drivers with poor credit as higher-risk customers, so it’s important when getting your insurance quotes. According to the Insurance Information Institute (Triple-I), low credit scores are a good predictor of future insurance claims.
Insurance companies lose money when people who have bad credit file claims. Therefore, they charge higher premiums to drivers with a history of low credit to cover the risk of claims. In the end, insurance companies use the practice of charging bad-credit drivers more to reduce their financial risk and liability.
Because of this, in states where it is permitted, most car insurance companies consider your credit score when quoting a policy. A licensed agent typically asks for your social security number during the quoting process. This information is relevant for calculating your credit-based insurance score.
How does credit score affect car insurance rates?
Car insurance premiums are significantly influenced by a driver’s credit score. Every major insurance company uses credit scores as a factor in determining premiums. The five components that go into calculating your credit score, also known as a FICO Score, are all connected to your borrowing history and current financial situation.
- Payment history: 35%
- The amount owed: 30%
- Length of credit history: 15%
- Credit mix (having multiple types of credit): 10%
- New credit: 10%
In reality, it’s more complicated than matching a specific score with a specific premium. Insurance companies take your full credit report and run it through an algorithm to calculate an insurance score. Regarding insurance, your creditworthiness isn’t the only factor determining a person’s risk to an insurance company. Your credit score may affect your premium in different ways in different states.
What states do not allow credit checks for insurance?
Certain states prohibit insurance companies from using a person’s credit score to determine the cost of their policy. Currently, there are five states where insurance companies are prohibited by state law from using credit scores to determine car insurance rates:
- California
- Hawaii
- Massachusetts
- Michigan
- Washington (temporarily)
Using your credit score in these states is still possible, which means that having a good credit score can help lower your insurance premiums. If you don’t live in one of the five states listed above, you can expect car insurance companies to check your credit score when you apply for insurance.
Insurance score vs. Credit score
There is a difference between a credit score and an insurance score, even though they appear similar. Using an insurance score, an insurance company can see how likely it would be for you to file for compensation. However, your credit score has an impact on your insurance rating.
Types of auto insurance that may not require a credit check
Telematics insurance
Consider telematics-based insurance if you’re worried about expensive car insurance quotes because of a poor credit score. Sometimes, it may be possible to avoid a credit check by signing up for a car insurance policy without a credit check. Telematics devices or mobile apps monitor your driving habits, such as average speed and how quickly you brake.
A telematics-based insurance premium is based on how safely (or unsafely) you drive rather than on a monthly flat rate or a rate based on a specific distance traveled. It’s possible to make up for a low credit score by driving defensively and responsibly. A credit check isn’t required for the following telematics-based insurance programs:
- Progressive Snapshot
- State Farm Drive Safe and Save
- Farmers Signal
- Allstate Drivewise
Usage-based insurance
A usage-based insurance company will charge you a monthly premium based on the number of miles you drive rather than a fixed annual or semiannual rate. Pay-per-mile insurance may be a more cost-effective option for those who don’t drive frequently. Some usage-based insurance companies will not check your credit score because there is no fixed premium. The following are some companies and the programs they offer about usage-based insurance:
- Root Insurance
- MetroMile
- Milewise from Allstate
- SmartMiles from Nationwide
For long-distance drivers, usage-based insurance may not be the best option. If you are a commuter or student, you may end up paying more than if you had traditional car insurance because of the pricing structure.
Car insurance companies that do not use credit scores
Progressive
While Progressive offers standard coverage, its most notable feature is its numerous discounts for experienced and cautious drivers. You don’t need a high credit score if your driving record is excellent.
Allstate
Rental reimbursement, roadside assistance, auto glass repair, new car, and gap coverage are just a few of the add-ons available to Allstate customers that set it apart from the competition. Some of the standard features include liability, collision, and PIP.
Dillo
If you are a high-risk driver who needs immediate insurance coverage, Dillo is your best option. It doesn’t necessitate a stellar credit rating to get a discount. The prices are still within a reasonable range even without it.
CURE
It doesn’t matter if you have a bad credit score, no college degree, or no job CURE got you covered. Only your driving record matters; the better it is, the more reasonable your rates will be. Even those with less-than-perfect credit in New Jersey or Pennsylvania should consider this provider.
Empower Insurance Services
Empower is a well-established auto insurance company, so their rates and coverages are more competitive. You need not be concerned about your credit or financial situation because Empower has a solution to fit your needs and your budget.
USAA
If you drive a car and are a military member, the USAA can provide you with the coverage you require. Low- and high-risk drivers can benefit from insurance plans, including discounts, accident forgiveness, and money-saving options.
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