Bill (not his real name, his real name is Jeff), calls me up and says:
“My next door neighbor drives a Veyron, I drive a Mazda Miata, and yet I pay more for insurance than he does. How come”?
Kids, au pairs, your driving habits, etc. , all factor into what you pay. So does your credit history. Know that having a bad credit score can increase your car insurance premiums just as fast as a couple of tickets.
So I explain to Bill/Jeff, that an insurance score – or insurance credit score – is a point system based on select credit report characteristics.
While there is no direct relationship to financial credit scores used by banks, insurance scores are not intended to measure creditworthiness but rather to predict risk.
Insurance companies are all over risk, (think of the guys in Vegas that predict a sports bet “spread”) and use these insurance scores in underwriting decisions and to partially determine charges for premiums. And that may apply to what you pay for life insurance, too.
Is the moral of this story to:
- Live next door to a guy who owns a Bugatti and beg for rides?
- Predict the winner of the 2012 BCS National Championship? (Oklahoma 7-2 favorite)
- Knowing how your credit score influences your car insurance premiums?
Yep, all three.
See you on down the road,