Low credit causes significant issues in every aspect of an individual’s finances, including car insurance.
In some area, people with bad credit scores end-up paying significantly higher prices for insurance than the others with good credit scores, which is why car insurance quotes online are a great way to find options and best prices. So let’s dig deeper into the relationship between auto insurance and a bad credit score.
Before getting started, be sure to click the following link if you’re looking for car insurance for bad credit drivers — the licensed advisors at Surex can answer any and all of your car insurance questions.
Correlation Between Low Credit Scores and High Car Insurance Rates
The credit score is based on the credit history period, payment history, new credit applications, outstanding debt, and other credits or loans possessed by the individual.
An individual’s credit rating doesn’t have anything to do with the practical applications of insurance. It’s just that the insurance companies determine the insurance-paying capability of the person. Also, there is a correlation between collision risk, filing insurance claims, and poor credit ratings.
The insurance companies presume that the individuals who are experts at managing their finances are more likely to keep their car in good shape. Plus, they also drive more responsibly. Many consider it a contentious perspective, but it forms a strong basis for a valid argument.
Regardless, a Code of Conduct has been established by the IBC (Insurance Bureau of Canada) for the use of credit info that guides the insurers and protects the interests of consumer protection. The insurance companies can’t:
- Deny or cancel insurance policies based on low credit score only
- Deny a policy if the consumer has no credit history
According to IBC’s estimates, 85% of casualty and property companies across the nation follow this code. It allows insurance firms to obtain consumers’ consent for viewing their credit reports. Plus, the code also defines the rules and regulations the insurance company needs to follow in extraordinary circumstances such as disability or illness when analyzing consumer credit scores and reports.
Can Consumers with A Bad Credit Score Get Car Insurance?
Every province in Canada requires car owners to have liability insurance. Fortunately, there is a wide range of car insurance options for individuals with a low credit score. However, the options may be expensive comparatively depending on the province and credit score value. According to the estimates, the insurance rates for people with bad credit scores can increase up to 137%.
Let’s understand this with the help of an example. A 32-year-old car owner with a good credit score gets average annual car insurance for $1,500. However, if the person has a fair credit score, the average insurance value may increase to $2,100. And if the individual has a poor score, the average annual value of the insurance may increase further to $3,100 or above.
Simply put, poor credit drivers can also get insurance but at a comparatively higher price.
However, insurance companies also consider other factors like age and driving history when analyzing the credit score.
Why Do Car Insurers Consider Credit Score When Determining Risk Level?
Today, more and more insurance companies in Canada have started to use credit scores when calculating insurance prices. They compare the scores with car insurance claims from other people with similar scores. Besides, credit score-based insurance enables companies to better understand the consumer’s credit history and draw the accident risk.
Credit scores provide a better idea of the individual’s financial responsibility. An individual with low credit is more likely to be involved in an accident. But many oppose credit score-based insurance. According to their say, credit score has no relation with the risk level of getting into or causing an accident.
Using credit scores to determine the rates doesn’t significantly impact people with bad credit. Though it’s always advantageous to have a good credit history, it’s still a small factor in calculating insurance costs. For example, Canadians with a history of avoiding accidents and tickets and excellent driving records are more likely to get a fair-priced auto insurance quote.
Best Ways to Get Car Insurance for People with Bad Credit
Poor credit is sure to lay a negative impact on the car insurance rates, but there are some options to find cheap car insurance:
Request For Discounts or Rewards
Contact your insurance advisor when looking for car insurance deals. The professional will give you a better idea and review of top auto insurance deals. There are multiple ways of saving on insurance, given you find the best discounts available in the market.
Besides, you may also get some rewards for being an excellent driver. In this case, you may apply for usage-based car insurance. The individual’s driving behaviours are monitored in this type of auto insurance, and the scores are calculated accordingly. You could be eligible for a discount if you attain fair scores.
Compare Your Car Insurance for Bad Credit Rating Options with Different Companies
Comparing insurance rates is ideal for getting low-priced deals. Get started with researching and shortlisting the potential insurance companies offering deals to people with poor credit. Then, compare the quotes when choosing an insurer.
Note that every province has different rules and regulations regarding policies. Therefore, the insurance prices vary accordingly.
- For example, if you are settled in Quebec, Manitoba, Saskatchewan or B.C., you can apply for basic car insurance through the government-provided programs and get extra coverage from private insurers.
- Whereas if you live in New Brunswick, Alberta, Labrador, Newfoundland, Nova Scotia, or Ontario, drivers’ only choice is buying car insurance from private firms.
Review The Insurance Policy and Take Note of The Coverage Types
The car insurance needs of an individual are likely to change since they first bought the insurance policy. Hence, it’s best to review your auto insurance policy and check what coverage is included. For example, people driving an old car may no longer need comprehensive or collision insurance.
Car Insurance for Bad Credit Canada — What Have You Learned?
At times insurance companies decline to offer adequate insurance coverage or charge unreasonable prices from people with a poor credit score. In such cases, the individual has the right to apply for facility car insurance.
Some insurance companies offer high-risk auto insurance, but it may come at a high price. Check your credit score online before searching for car insurance companies. It will help you plan better and find the right company fitting your requirements.Sh