What kinds of questions can I expect to answer when I am applying for an insurance policy?

When you apply for an insurance policy, you will be asked a number of questions. For example, your name,age, sex, address, etc. In addition, you will be asked a number of other questions which will be used to determine what type of risk you are.

For example when an insurance company is deciding whether or not to supply automobile insurance to a potential policy owner, they will want to know about the person's previous driving record, whether or not they have been in any recent automobile accidents or received any tickets and what type of car will be insured.

All of this information will be used for two purposes.

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My child is heading off to college this fall. What insurance issues does this raise?

As you send your children off to college, you probably have a lot of things on your mind - whether they'll eat right and get enough sleep, how to pay the tuition bills, what to do with that empty bedroom, etc. For most people, insurance concerns are pretty low on the priority list. But there are some important issues you should consider

  • Health Insurance: Make sure your child's health is covered.
  • Renters Insurance: Make sure your child's possessions are covered.
  • Auto Insurance: Make sure the car is covered.

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How often should I check my Social Security earnings record? Is there much of a chance that an error may occur?

You should check your Social Security earnings record at least once every three years. Errors in your earnings record are more likely to occur if you change jobs frequently or have more than one employer.

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What do I give up by not using an agent to purchase insurance?

The disadvantage of not using an agent to purchase insurance is that the policyholder does not receive as much, or often any, personal service. A licensed agent with whom there is direct contact can be vital when purchasing a product and absolutely necessary when filing a claim.

Without an agent to act as your personal advocate during the claims process, you are left to take care of the details on your own... not sure who to contact at the insurance company or who you can really trust to help you during the times in life when you need help the most. Without an agent you are on your own to absorb the frustration and expense of resolving your problems.

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Am I at risk if I don't use a licensed agent?

Many "direct writing" insurance companies/providers fail to tell you that the "call center personnel" who will take your information and issue the policy ARE NOT licensed to sell insurance, therefore lacking the professional knowledge to guide you toward an acceptable level of protection. These companies are conducting business using a loophole within the law which allows the company to have 1 license while everyone else works without it. Going this route can place your financial future at risk because unlicensed personnel are trained to simply sell you a policy without being aware of what "real" protection means.

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Why do insurers need to see my credit history?

Insurance companies use financial history along with other factors (such as, in the case of auto insurance, years of driving experience) to properly classify an insured according to his/her potential risk. Studies have shown a correlation between a consumer's financial history and his/her future insurance loss potential. Thus, some insurance companies believe the use of credit helps to underwrite an applicant at a cost that reflects their specific risk.

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Why do insurance companies use scored credit reports?

Scores provide an objective and consistent tool that some insurers use along with other applicant information to better predict the likelihood of a consumer filing future claims. Scores also help streamline the decision process, so policies can be issued more efficiently. By predicting the likelihood of future claims, insurers can control risk, thereby enabling them to offer insurance coverage to more consumers at a fair cost.

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What variables (data elements in a credit report) are used in calculating an insurance score?

Some credit variables that are used include: outstanding debt, length of credit history, late payments, new applications for credit, types of credit used, payment patterns, available credit, public records, and past due amounts. A credit report can contain both positive and negative information. Different scoring models may use different credit variables. All variables in a model are considered together to produce the best prediction.

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What variables are NOT used in calculating an insurance score?

Race, color, religion, national origin, gender, marital status, sexual orientation, age, address, salary, disability, occupation, title, employer, date employed or employment history are not used for scoring purposes. Inquiries made for account reviews, promotions or insurance purposes are not used in calculating an insurance score. Also, other variables that, by law, may not be considered are disregarded.

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Who makes the decision to grant or deny insurance coverage or to charge a particular rate or premium?

Decisions about insurance coverage and/or rates are made by the insurance companies.

Each insurer develops underwriting decisions based on their own business requirements. Insurance companies evaluate credit reports and/or insurance scores according to their own proprietary strategies. Other information, such as application data, prior claims/loss data or motor vehicle records, may also be evaluated as part of the insurance underwriting process.

Many insurance companies have automated the evaluation process. The decision may be delivered to an agent via a ChoicePoint system, but the guidelines used to make that decision are determined by the insurance company.

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What is the Fair Credit Reporting Act (FCRA)?

The Fair Credit Reporting Act is a federal law designed to promote the accuracy, fairness, and permissible use of information contained in the files of Consumer Reporting Agencies. In general, the FCRA requires that:

  • Access to a consumer's file is limited to those with a permissible purpose.
  • Generally, adverse information that is more than seven years old may not be reported, except in certain circumstances.
  • A consumer must be told if information in a credit report has had an adverse impact on him/her.
  • A consumer can find out what is in his/her consumer reporting file.
  • A consumer can dispute inaccurate items with the source of the information. (In the case of credit information, this is the credit bureau, not ChoicePoint.)
  • Inaccurate information must be corrected.

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