How Your Driving Record Affects Your Life Insurance
You may already know that your health is a big factor that can impact your life insurance rates.
What you may not realize is that your driving record also may have an effect.
Yes — your driving record.
Think about this, if you regularly speed 20 mph over the limit your chances of dying if you get into a car accident are higher than if you drove the posted speed. At higher speeds you have to react more quickly and have less margin for error, making accidents more likely. The difference between a car crash at 55 mph and one at 65 mph is a 24% increase in the chances that the accident will be fatal.
Risky Driving Affects Your Life Insurance Rate
Life insurance pricing is all based on risk. The risk the insurance company takes on by insuring your life.
What are the chances you’ll die before old age? Living a risky lifestyle or having a chronic medical condition increases these chances. You’d be deemed a higher risk to insure. The higher the risk you are, the higher your life insurance rate is.
» Learn more: Financial Consequences of DWIs and DUIs
When a person applies for life insurance, the carrier will request a Motor Vehicle Record (or MVR, for short) which will contain information about several different types of vehicle-related incidents. That list includes:
DUIs,
Reckless driving,
Speeding,
Accidents, as well as information about who was at fault,
License suspensions and revocations,
Vehicular crimes, such as a hit-and-run, vehicular manslaughter, and vehicular assault,
Moving violations,
Dangerous vehicles owned, like motorcycles,
Parking tickets, failure to yield, and other minor infractions.
Typically, if you have no major violations within the past five years you can still be considered for the best rate class: Preferred Plus. Provided everything else in your application is stellar, like your health, the life insurance company may not even care if you have a speeding ticket or two within the last few years.
However, more than two violations within the past three years may cause your rates to be higher and having more than four could cause you to be declined for coverage.
If you have a pattern of being reckless behind the wheel, the life insurance companies see this as a red flag and deem you too risky to insure.
Example 1
Dom Toretto is a 35-year-old male who is looking for a 30-year term policy with $500,000 in coverage.
He’s perfectly healthy and, as far as most people know, leads a normal civilian life, so he would have normally received a Preferred Plus rating, putting his price at approximately $35 per month.
However, he received a violation for traveling over 30 mph above the speed limit a few months ago. His driving record check discovered this violation, which bumped him down to Standard rate classes. His final price after his approval was $68 monthly – almost double his original cost.
Example 2
Luke Hobbs is a 40-year-old male DSS agent who’s also in peak physical condition. However, he’s been chasing down some daring criminals, and has gotten into a few accidents during the hunt. One accident last year wasn’t his fault, but he was to blame for a crash three years ago.
Luckily, these fender benders won’t affect his price due to his lack of fault and the time elapsed since the accident he was at fault for.
He applies for a 20-year $1,000,000 term policy. He’s approved at Preferred Plus and locks in a monthly rate of $50.
What You Can Do to Improve Your Driving Record
When it comes to improving the marks on your driving record, time is your friend. Just like improving your credit score, fixing your driving record doesn’t happen overnight.
The first thing to know is that each state governs driver record points differently. Traffic violations carry points with them. The fewer points you have on your record, the better. To learn about your state’s point removal policy, contact your local DMV.
The second thing is to start driving better. Don’t text and drive. Don’t drink and drive. Don’t Snapchat and drive. Don’t drive 20 miles over the speed limit.
