When you apply for life insurance, you probably won’t be surprised when the insurance company asks questions about your lifestyle, your weight and height, your age, and even what you do for a living. After all, these are factors that understandably affect your anticipated life span and help underwriters determine the best rates.

But what you may not know is that life insurance applications ask for other information as well, including financial information. The application may say in the fine print that the insurance company can do a credit check or get a consumer credit report. Why? Because your credit score, payment history, debt and, bankruptcy filings can impact your insurance rates—and in some cases, even determine if you get offered a life insurance policy.

Let’s unpack how that works.

How credit history is used in life insurance

Life insurance underwriters need a lot of information to understand the risk of offering you a policy. After all, the life insurance company is agreeing to pay a lot of money if you die while covered by their policy. They often require a physical exam to better understand how your physical status might affect your lifespan. In the same way, a credit check helps the insurance company better understand how you manage your finances, which can reflect how you live your life. If you don’t manage your money very well, the insurance company might conclude that you are a more expensive risk for them.

The Insurance Information Institute (III), an industry organization providing information to audiences ranging from consumers to government organizations, has seen that those with lower credit scores tend to file more claims. According to an III spokesperson, studies have shown that people who manage their finances well tend to also manage other aspects of their lives well. That translates into a better risk for the insurance company.

There are a few other conclusions life insurance companies might come to if your finances aren’t in order:

  •   You may have difficulty paying your premiums. While an insurance policy can always be cancelled for nonpayment of the premium, it costs the insurance company money to underwrite the policy. If that policy goes unpaid in the first few years, the insurance company loses money on it.
  •   If you pay your bills, you’ll live longer. One insurance expert noted that those able to pay their bills regularly tend to live longer. That means the insurance company is collecting premiums for more time—delaying the payout and saving the company money.
  •   If you are a middle or high income American, your life expectancy is higher. A study in The Lancet, a medical journal, showed that life expectancy has increased among middle and high income Americans, from 1980 to 2015, as compared to lower income Americans. There’s an association between lower income and poor health.

Bankruptcy can damage your chances of getting life insurance

The area where your finances and debt history impacts life insurance the most is bankruptcy. If you declared bankruptcy recently or are in the process, now is not the time to apply for most life insurance policies. For Chapter 7 bankruptcy, insurance companies may require that your bankruptcy be discharged for a certain number of years, meaning that you have been released from personal liability for some specific types of debts. Your application will likely be declined if you’ve declared Chapter 7 bankruptcy within the last year or so, though some insurance companies have longer windows after Chapter 7 bankruptcy declarations, before they’ll give you a life insurance policy. If you’ve filed for Chapter 13 bankruptcy, an insurance company may want to see that you are consistently repaying debts under the agreement for a certain period of time before writing a policy for you.

Credit history matters more for other types of insurance

There’s good news for those with bad credit. Credit history affects life insurance policy rates much less than it affects other types of insurance, like auto or home insurance rates. Auto insurance underwriters see a poor credit history as leading to financial stress. And that can lead to riskier driving behaviors.

Of course, that’s not good news if you’re applying for auto insurance. But if you want life insurance, you shouldn’t be denied a policy based on your credit unless you’ve declared bankruptcy within a certain time frame, though your life insurance rates may be slightly higher. Each life insurance company has a different formula for how they factor in credit history.

A higher credit score can qualify you for a better rate class. Credit score isn’t the only determining factor, though. For example, if you smoke, skydive, or have health risk factors such as elevated liver enzyme levels, that can impact your rate class as well. So even if you have an 850 credit score, that doesn’t guarantee you’ll be in the best rate class.

It behooves you to know your credit score and improve your credit history. That’s not just for your life insurance rates, though. Your credit history affects many aspects of your financial life, from rates you’ll pay on any loan, credit card interest rates, snagging a great apartment or job.

Curious how your financial fitness (and physical fitness) affects your life insurance premiums? Head over to HealthIQ.com to see if you qualify for special rate life insurance for the health conscious.


Health IQ’s mission is to celebrate the health conscious through financial rewards. That’s why Health IQ is the fastest growing life insurance company in the United States, saving those who qualify up to 33% lower rates on their Life Insurance.

Fast facts:

  •   Secured $7.0 Billion in coverage
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  •   Featured on ForbesCNBCTechCrunch, etc.