by Edward Snaineh
Illinois Homeowners Insurance Rates Expert in Chicago

The vast majority of standard insurance companies will require a credit check for homeowners insurance quotes or for auto insurance rates affirmation. Insurance experts found that there is positive correlation between bad credits of applicants and potential insurance claims. Based on this positive correlation, insurance rates are set normally with high base rate, then a discount or credit is applied for people with more favorable credits.

Insurance discounts for high credit scores is based on the degree of superiority of the credit. Insurance applicants with higher rating get better insurance rates. Most insurance companies will classify applicants using a 'tier rating system' where each tier represents specific range of credit worthiness. With the way a few insurers structure their rating systems, it will make a difference in the final homeowners insurance quote if the husband preceded the wife or vise versa on the homeowners insurance application, if the credit of the husband and the wife is considerably different. This trend is diminishing, and most insurers are combining the credit scores of both spouses for the final determination of the homeowners insurance rates.

Having bad credit alone may not be a reason for companies to decline your homeowners insurance application. However, it is almost certain that people with bad credit will get higher homeowners insurance rates than those with good credit when submitting an application with standard or preferred insurers. For that reason, people with bad credit may find themselves compelled to deal with nonstandard homeowners insurers. Type of coverages, claim services and other riders offered may not be of the same quality that standard and preferred insurers offer. For example, some non standard homeowners insurers may not offer riders such as Guaranteed Replacement Cost of Contents or Guaranteed Replacement Cost of Structure, very valuable riders that are normally added at little or no extra charge with most standard and preferred insurers.

Bankruptcy and Homeowners Insurance Rates

The serious situation that arises very often is with people who have bankruptcy. Many standard and preferred homeowners insurance companies will not offer the usual HO3 policies to applicants who filed for bankruptcy in the past five to seven years, or may offer it to them but at an extremely prohibitive rate. Most forms offered to applicants with bankruptcy focus on insuring the dwelling of the house, not the personal property.

Bad Credit or Claims History, Which One Is Worse?

As indicated earlier bad credit is always associated with high homeowners insurance rates. The same could be said about previous claims. The frequency of previous claims, rather than the amounts paid on the claims, is a critical factor in determining the home insurance quotes. A situation of three claims totaling $4,000 is much worse than 1 claim with $15,000.

Homeowners Insurance Options for People With Bad Credits

Most marketing and competitive campaigns conducted by insurers are directed at people with more favorable credit. People who have less than good credit are advised to deal with independent insurance agents, or agents who represent a wide range of insurance companies with different appetite for credits. Some companies that do not check on the credit score, most often use the independent agency system,  can still provide excellent coverage and services.
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