Credit Where It’s Due

Andrew Forsythe

I RECENTLY STUMBLED on a way to save a significant sum on my home and auto insurance. While I knew that insurance companies use credit scores in setting premiums, I didn’t know about a policy option that could be turned to our advantage.

Our home, auto and umbrella policies are with Safeco, which is part of Liberty Mutual. I don’t know if this option is available with other insurers, although Liberty Mutual has many subsidiaries and I would guess it may be available with them. If and how credit history can be used in setting premiums also varies by state.

Buried in the pile of documents I receive every year with my policies is an innocuous-looking page titled “information about your policy.” It says that Safeco considers my credit history in setting my premiums and that, if I want the insurer to update my credit information, I can mail back the page. It also warns that the review could either raise or lower my premiums.

I never paid much attention to this. I had assumed Safeco was already monitoring my credit history and factoring it into my annual premiums. Also, the language about possibly increasing my premiums gave me pause.

Recently, when I received my annual policies, I called my local agent to grouse about the premium increases. She brought up the credit review forms, asked about my credit score—it hovers around 800—and suggested I send in the forms. She recently had another client who did so and received a premium reduction of several hundred dollars.

I took her advice and mailed in the forms, one for home and one for auto. The option didn’t apply to my umbrella policy. To my happy surprise, a couple of weeks later, I received a 20% reduction on my homeowner’s premium, worth $606, and a 27% cut on my auto premium, or $489, for a total savings of $1,095.

During this process, I had an online chat with a Safeco rep, who explained that the company runs my credit history when the policy is first issued. After that, it’s up to me to request it, which can be done once a year. It dawned on me that I’ve had my Safeco policies for many years, so my credit score must have increased a good bit during that time.

I keep an eye on my credit score with Credit Karma, so I felt comfortable that my score was good before I sent in the forms. Insurance companies use a credit-based insurance score, which is different from a regular credit score, but I figured they were likely similar.

If your insurer offers a credit review, I suggest checking your score right before making the request. Indeed, after paying my now-reduced annual premiums in full using my credit card, I raised my card balance relative to my card’s credit limit—and my credit score dropped 12 points.

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