SALT LAKE CITY — It’s something we all need to buy as drivers: car insurance.
What you pay for this insurance may depend on the type of vehicle you own, your age and where you live. But did you know that your credit score can affect how much you pay?
Although using credit scores to determine insurance rates is illegal in a few states, in Utah it’s fair game.
According to figures from Harvard Health Watch, we will spend nearly 38,000 hours driving in our lifetime. But the amount you pay for this insurance isn’t just based on your driving record.
“The problem is that we are billed based on things that have nothing to do with how we drive, but rather with our personal financial situation,” says Doug Heller, director of insurance for the Consumer Federation of America. “When the government forces us to buy a certain product, we should be free to buy that product at a fair price based on the risk we bring down the road.”
It’s the latest in uncovering what some states call discriminatory auto insurance pricing.
States like Washington and Kentucky are taking a closer look at the practices of state insurance departments. Heller explains how Utah is no stranger to using credit scores to overcharge drivers.
“In Utah they are all allowed to use that credit score and they use it to varying degrees. Some might charge an 80% penalty for someone with low credit. Someone might charge a penalty 130%. Either way, you’re paying a lot more,” he said.
So how much more could you pay based on your credit score? We looked at Consumer Federation figures for Utah.
In Utah, just to buy the minimum auto insurance policy required by state law, you end up paying about $200 more per year if your credit is fair instead of great.
If you have bad credit, you end up paying around $600 more per year for the same basic policy. This does not include comprehensive or collision coverage.
“Our creditworthiness is like a sticker that tells us how much more we’re going to buy because people with higher credit tend to have more wealth, which means they’ll be more likely to buy an insurance policy. home and a life insurance policy and maybe they will sign up with their bank account that the insurance companies have and they are affiliated with,” says Heller. “That’s what insurance companies are interested in. insurance.”
Heller says that without action by lawmakers, little can be done to change these practices.
“It’s been a very powerful lobbying influence that has kept this practice alive for quite a long time,” says Heller.
What can you do to ensure you get the best rate for your car insurance? The Consumers’ Federation recommends shopping around every three years because you’re bound to find something cheaper.
While many people think they’re getting a loyalty discount by staying with their longtime insurance company, Heller says the discount doesn’t do you any good if it’s not as much savings as you would get if you were going to another company.