The Effects Of Bad Credit And Lapses In Coverage On Auto Insurance Rates
Posted on: 13 November 2018
If you currently do not have auto insurance but need it, you may end up paying more for your policy than you want to if your credit is bad. Not only does a person's credit play a role in the price they pay for insurance coverage, but people who currently do not have insurance are considered high-risk, simply because there is a lapse in their coverage. Here are a few things to understand about bad credit, lapses, and auto insurance rates.
Why a Lapse Increases Your Risk
The first thing to understand about insurance is that risk plays a major role in the price of a policy. A person with low risk pays less, while a person with high risk pays more. Anytime a person has auto insurance coverage and then ends the policy, it is viewed as a lapse. A lapse is similar to a period where a person has no auto coverage at all. When this occurs, insurance companies view it as a red flag, and this automatically puts the person in the high-risk category. When you are considered a high-risk, you will pay more for insurance coverage.
Why Credit Matters
The rates people pay for auto insurance are also affected by their credit. A person with excellent credit could pay 50 percent less than a person with bad credit, and this difference is strictly tied to the credit of the person and no other major differences. People with bad credit statistically are more prone to making claims on their policies. They may be more prone to not paying their insurance bills too, and they may be more likely to receive traffic violations, such as tickets.
What You Can Do
If you are currently in this position—without any insurance and with bad credit—there are things you can do that may help you find an affordable policy. The first thing is to contact several insurance companies for quotes. Secondly, ask about discounts you might qualify for. Another option is to purchase a lower coverage for your car. If you do this, it would offer a more affordable policy right now. Over time, you could build up your reputation with the insurance company and your rates may drop in the future.
If you need insurance, contact an insurance company today. They can give you a quote, and they may also be able to give you some suggestions for lowering the cost of your policy.
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