Kudos has partnered with CardRatings and Red Ventures for our coverage of credit card products. Kudos, CardRatings, and Red Ventures may receive a commission from card issuers. Kudos may receive commission from card issuers. Some of the card offers that appear on Kudos are from advertisers and may impact how and where card products appear on the site. Kudos tries to include as many card companies and offers as we are aware of, including offers from issuers that don't pay us, but we may not cover all card companies or all available card offers. You don't have to use our links, but we're grateful when you do!
Life Insurance with Bad Credit – 5 Tips to Save on Your Premium
December 12, 2024
Having bad credit can make many financial tasks harder – but getting life insurance doesn’t have to be one of them. While some insurers may view a low credit score as a risk factor, you still have plenty of options to protect your family without breaking the bank.
Here are five tips to help you save on life insurance with bad credit:
1. Shop Around and Compare Policies
When you have bad credit, it’s crucial to shop around with multiple life insurance companies. Insurers differ widely in how they treat credit history. Some companies might give you a higher quote due to a low credit-based insurance score, while others might not care much about credit at all and offer you a better rate. The only way to know is to compare.
Start by gathering quotes from several insurers. You can do this by contacting insurance agents or using online quote platforms. An independent life insurance broker can be extremely helpful here – they represent many insurers and can pinpoint which ones are more lenient with credit issues.
While comparing, make sure you’re looking at the same coverage terms (e.g. a 20-year term for $500,000) so you get an apples-to-apples comparison. Don’t assume that your bad credit will make rates high everywhere; you might be pleasantly surprised by one company’s offer versus another.
2. Look for Insurers or Policy Options That Don’t Use Credit
If you’re worried your credit is a big hurdle, consider focusing on insurance options that bypass credit checks altogether.
There are a few avenues for this:
- Group Life Insurance: If you have life insurance available through your employer, jump on that opportunity. Group life policies typically do not require any credit check – in fact, many don’t even require a medical exam. You can often get a baseline amount of coverage (1x or 2x your salary, for example) without any underwriting hassles.
- No Medical Exam / Simplified Issue Policies: Many insurers offer no-exam life insurance that relies on databases and algorithms for approval. These policies often use data like prescription history, driving records, and yes, credit history.
- Insurers That Advertise “No Credit Check”: A few life insurance companies or agencies specifically market to people with poor credit or other issues. They might not literally skip checking your credit, but they imply a more lenient approach. Be a bit cautious and research their reputation (ensure they’re financially sound).
- Smaller Regional Insurers or Fraternal Organizations: Sometimes, smaller insurance providers (like regional insurers or fraternal benefit societies) have different underwriting philosophies. They might not use credit scoring models at all, relying only on medical underwriting.
In short, you have alternatives if mainstream insurers are quoting high rates due to credit. Every situation is different, but exploring group coverage and no-credit-check policy options can yield an affordable solution that gets your family some protection now.
When shopping for any insurance, use available tools to your advantage. For instance, Kudos simplifies comparing auto insurance rates, helping you quickly find the best auto coverage at no cost. Similarly, for life insurance, leverage online quote tools or brokers.
3. Focus on Other Factors You Can Control
You can’t instantly fix a bad credit score, but you can influence other risk factors that life insurers care about.
By making sure you shine in these areas, you can offset some negativity from your credit history:
- Improve Your Health Profile: Health is king in life insurance. If you have any health conditions under your control, work on them.
- Stabilize Your Lifestyle: Life insurers also consider factors like your occupation and hobbies. While you might not change jobs to save on insurance, be mindful of risky hobbies during the underwriting process. If you’re an occasional skydiver or pilot, know that it could raise your rates. Perhaps hold off on extremely risky activities in the year you’re applying for coverage.
- Demonstrate Financial Responsibility in Other Ways: If your credit is bad due to something like a past bankruptcy or a string of late payments, consider writing a brief cover letter with your application explaining the situation. This is something an agent can help with. Maybe your credit tanked due to a one-time medical crisis or job loss that’s now resolved.
In essence, control what you can control. You might not be able to erase a missed payment history overnight, but you can absolutely ensure you’re in the best possible shape health-wise and lifestyle-wise when you apply. That can qualify you for discounts and preferred rates that outweigh a credit-based uptick.
4. Adjust Your Policy to Fit Your Budget
Another strategy to keep life insurance affordable with bad credit is to tweak the policy details to find a comfortable price. You never want to overstretch your budget.
Here’s how you can adjust:
- Choose Term Over Whole Life: If budget is a primary concern, a term life policy will almost always be the cheapest option for the most coverage. Whole life or universal life policies are much pricier and usually not necessary unless you have a specific lifelong need. A 20-year term policy can be 5-10 times cheaper than a whole life policy with the same face amount.
- Select a Shorter Term or Lower Coverage Amount: While it’s ideal to get the amount of coverage and term length you truly need, you might decide to start a bit smaller if cost is an issue.
- Pay Premiums Annually if Possible: Many insurers charge installment fees if you pay monthly or quarterly. These extra fees can effectively add a few percentage points to your premium cost. If you can manage to pay a lump sum once a year, you eliminate those fees and save money.
- Use Policy Riders Strategically: Some policies come with optional riders. Each rider can add a bit to the cost. Ask yourself if they’re necessary.
- Avoid Unneeded Extras: Similarly, if you’re being offered a policy that “bundles” investment features or cash value (in the case of certain life insurance products), remember that those extras come at a cost. You likely want pure insurance protection for now at the lowest price. You can invest elsewhere in the future when finances allow.
By tailoring the policy parameters, you can land on a premium that suits your wallet. Above all, make sure the premium is manageable. Protecting your family is crucial, but so is keeping the lights on today.
Find a balance – there is usually a policy configuration that will meet your most important coverage goals and still be affordable, even if you have to compromise a bit on secondary wishes.
5. Rebuild Your Credit (Long-Term Fix)
Finally, while it won’t help you get a lower rate this very instant, don’t neglect the importance of improving your credit over time. Not only will a better credit score potentially open doors to cheaper life insurance in the future, it will save you money and stress across all areas of your financial life (loans, credit cards, etc.).
Here are some credit tips that, over the long run, can boost your score:
- Pay All Bills on Time: This is the single biggest factor in most credit scores. Set up reminders or auto-pay to avoid any late payments. Over time, a record of consistent on-time payments will strengthen your credit profile.
- Reduce Outstanding Debt: High balances on your credit cards relative to their limits (high utilization) drag down your score. Try to pay down existing debts, focusing on credit cards with high interest. Not only will your credit improve as balances drop, but your financial stress may decrease too.
- Avoid New Credit Applications: Each hard inquiry for new credit can shave a few points off your score temporarily. When you’re in credit-rebuilding mode, only apply for new credit if absolutely needed.
- Check Your Credit Reports: Ensure there aren’t errors on your reports that are hurting your score unfairly. Dispute any inaccuracies you find. Sometimes people discover old collections or mistakes that, once removed, give a quick score boost.
- Build Positive Credit Lines: If you only have negative accounts, consider opening a secured credit card or credit-builder loan to start adding some positive track record. Use it lightly and pay it off each month. Over a couple of years, this can help balance out past negatives.
Improving credit is a gradual process – think in months and years, not weeks. In the meantime, don’t let “analysis paralysis” stop you from getting coverage now. It’s usually not wise to delay protecting your loved ones just because your credit isn’t ideal today.
Lock in what you can now, and know that you can always revisit your policy in the future. Life insurance isn’t set in stone – you can adjust coverage as your life situation (and credit situation) evolves.
Bottom Line
Bad credit might add a small wrinkle to buying life insurance, but it’s far from a roadblock. By shopping around, exploring credit-friendly options, optimizing other factors, choosing the right policy structure, and steadily improving your credit, you can ensure your family is protected without overpaying.
Financial setbacks happen, but they shouldn’t leave your family unprotected. With a bit of effort and the strategies above, you can secure peace of mind today and be on track for even better opportunities tomorrow.
Frequently Asked Questions (FAQs)
Can I get life insurance if I have bad credit?
Yes, you absolutely can. For the vast majority of people, bad credit alone will not prevent you from getting life insurance coverage. Most insurers will still offer you a policy – the main question is just what it will cost. Only in extreme credit situations might an insurer delay or decline coverage, and even then another insurer might approve you.
How much more will I pay for life insurance with bad credit?
It depends on the insurer and your overall profile. If your health is excellent and the only issue is credit, some insurers might still give you their best rate class – meaning you’d pay basically the same as someone with good credit. Other insurers might bump you down a tier, which could be, say, 10-25% higher premium than the very best rates. There’s no fixed surcharge like “add X dollars for bad credit.” It’s more nuanced.
What credit score do I need to get a life insurance policy?
There’s no specific credit score requirement for life insurance like there is for a mortgage or car loan. Life insurance underwriting doesn’t set a “minimum score.” In practice, if you have a higher score (e.g. 700+), you’re less likely to face any credit-related premium increases. If your score is very low (e.g. below 600), an insurer might take a closer look at why.
Will improving my credit lower my existing life insurance premium?
Not for the policy you already have – life insurance premiums are fixed at the start. The insurer won’t re-evaluate your credit later and send you a discount if your score improves. However, better credit could help you qualify for a new policy at a lower rate. Some people choose to re-shop their life insurance every few years.
Should I wait to buy life insurance until my credit score is better?
Generally, no – don’t wait if you need coverage now. While it’s tempting to postpone in hopes of getting a cheaper rate later, you risk something far more important: being uninsured during that waiting period. Remember, life insurance rates go up with age, and you never know if a health issue could arise while you wait.
A credit score might take months or years to significantly improve. In that time, you’ll also be older, which by itself makes coverage pricier. The safer approach is to get the coverage in place now at a price you can afford.
Double the Cash, Zero the Worry
Looking for consistent rewards without the hassle? The Citi Double Cash® Card rewards you twice: 1% when you buy, another 1% when you pay—for a total 2% cash back on every purchase with no categories to track. Plus, smart balance transfer options help you take control of existing debt. Simple, powerful, perfect for today's savvy spenders.
Editorial Disclosure: Opinions expressed here are those of Kudos alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.
