What credit score do you need for life insurance? (2024)

What credit score do you need for life insurance?

You may be happy to learn that your actual credit score won't have an impact on whether you qualify for most life insurance coverage.

In some cases, having negative information on your credit report can cause an insurance company to deny your application for a policy outright, regardless of how healthy you are. If you're in the midst of bankruptcy proceeding, for instance, you might have a hard time getting an insurance company to offer you coverage.

People are typically denied life insurance because they fall into a high-risk category. This is often due to health challenges like diabetes, obesity or a previous diagnosis of serious disease. There are also nonhealth reasons for being denied life insurance.

Financial Issues

Insurers may reject your life insurance application if there's reason to believe you can't afford the premiums. This might happen if you have a history of bankruptcy, lots of outstanding debt or a low income.

An insurance score, also known as an insurance credit score, is a rating computed and used by insurance companies that represents the probability of an individual filing an insurance claim while under coverage. The score is based on the individual's credit rating and will affect the premiums they pay for the coverage.

Life insurance may not pay out if the policy expires, premiums aren't paid, or there are false statements on the application. Other reasons include death from illegal activities, suicide, or homicide, with insurers investigating claims thoroughly.

Your credit score doesn't have a direct effect on your life insurance premiums. However, when you apply for life insurance, insurers will do a soft inquiry of your credit report and the same factors that hurt your credit score can also hurt your options for life insurance coverage.

For example, by failing to disclose medical conditions they knew they had, failing to disclose medications they take, or failing to disclose dangerous sports or hobbies. Even underreporting your weight or age can void your policy.

In general, life insurance is worth it if your death would place a financial burden on other people. Consider getting coverage if: You want to cover your own burial costs. Funerals can be pricey and your loved ones may not have the cash to cover the bill.

In general, the younger and healthier you are, the easier it will be to qualify for life insurance, while the older and less healthy you are, the harder it will be. Certain lifestyle choices, such as using tobacco or engaging in risky hobbies such as skydiving, also make it harder to qualify or lead to higher rates.

What to do instead of life insurance?

Cash out the policy.

This means that you can stop paying the premium and collect the available cash savings. You will no longer be covered by life insurance, but you will at least save some of the proceeds of the policy.

Most insurance companies will not reject applications for insurance based only on a low credit-based insurance score, but they may only offer that applicant a policy with a higher premium or higher monthly rate. Paying a higher premium or rate could cost consumers hundreds of dollars per year.

The average life insurance payout in the U.S. is about $168,000, according to Aflac. However, the payout of your life insurance policy will depend on the face amount (death benefit) you choose and any money accelerated, borrowed against or withdrawn from the policy prior to the payout.

Another way to calculate the amount of life insurance needed is to multiply your annual salary by the number of years left until retirement. For example, if a 40-year-old currently makes $20,000 a year, they will need $500,000 (25 years × $20,000) in life insurance to reach age 65.

Reasons to be denied life insurance

Some examples of things that life insurance underwriters consider are: Health issues — Many health problems fall into a high-risk category like diabetes, high blood pressure, obesity, chronic illness or an earlier health condition, such as cancer.

Life insurance covers death due to natural causes, illness, and accidents. However, the insurance company can deny paying out your death benefit in certain circ*mstances, such as if you lie on your application, engage in risky behaviors, or fail to pay your premiums.

The minimum term life insurance policy you can purchase is typically $100,000, though some companies offer policies of as low as $25,000 to $50,000.

How does my credit score affect life insurance? You may be happy to learn that your actual credit score won't have an impact on whether you qualify for most life insurance coverage.

Does insurance care about credit score?

California

Insurance companies in California don't use credit-based scores or your credit history for underwriting or rating auto policies, or setting rates for homeowners insurance. As a result, your credit won't impact your ability to get or renew a policy, or how much you pay in premiums.

Non-payment of insurance bills can also have negative consequences for your credit reports and scores, however. While insurers don't report your payments (or non-payments) to credit bureaus, unpaid insurance bills will affect your credit report if the insurer turns them over to collection agencies.

But the life insurance company will commonly set an expectation of 4 to 6 weeks. The higher the coverage requested, the longer the life insurance underwriting process may take.

When initially underwriting a life insurance policy, life insurance companies sometimes check up to 10 years of an applicant's medical records.

Do You Need Proof of Income for Life Insurance? In general, you should expect to provide income information as part of your life insurance application. Insurance companies review your financial information as part of an overall risk assessment.