Question
What is the name of your state?What is the name of your state?
NY.
My wife and I are preparing to purchace term life insurance. We have a 5 yr. old son. Due to a series of bad events about 5 years ago our credit is horrible. Proir to the events our credit was excellent. We've been working faithfully with a debt counseling service for 4 years. I have a judgement against me in NYC with a collection agency for a different debt (though I accept as my fault/problem, I was traveling on business when the summons was served, never showed up in court, and did not know anything was happenning until my bank accounts were frozen.) I have been paying my monthly agreement on this judgement. As we are working diligently to be debt free and hope to be before the end of this year, how will my screwed up credit affect my life insurance premiums and why?
Answer
The answer to your final question is . . . it depends.
Depends on which carrier you choose. Some carriers pull credit and use it to determine a risk rating, others will decline you.
Depends on how much insurance you want. Low face amounts usually dont bring as much scrutiny as high face amounts.
Depends on whether you are using the services of a competent agent, an incompetent one, or DIY. A good agent will take all factors into account and recommend a company that will underwrite you in spite of your past financial problems. An incompetent one will simply show you the lowest rate then leave you out to dry. DIY will bring pretty much the same results as using an incompetent agent.
Why do carriers use credit history?
Because they can. They have actuaries who do nothing but figure out ways policyholders can screw the company, then they develop risk models to minimize those risks.