Today’s entry: You had an interesting point recently when you said part of the reason insurance costs are higher in Florida is due to poorer credit scores. What I’m curious about is how big of a factor are credit scores on insurance costs?
Bottom Line: Today’s note follows Thurday’s Q&A highlighting the challenges Floridians face with the high cost of auto insurance rates. Governor DeSantis vetoed the legislation which would have overhauled Florida’s “no-fault” auto insurance model, but that would likely have led to higher premiums for many Floridians in the process. Here’s a quick recap before diving in on the specific impact of credit scores. Florida’s auto insurance premiums are the 3rd highest nationally, with the average annual premium per vehicle hitting a whopping $2,082. It’s incredible that the average two-car family is now spending over four grand a year on auto insurance. As mentioned, our biggest issue is the high number of uninsured motorists on the road in Florida. It’s hard to craft laws to improve the auto insurance market in Florida when the biggest cost issues we have are related to uninsured motorists who aren’t abiding by existing laws. Credit scores do play a role and the average Floridian’s credit score, while considered good at 701, still lags the national average by ten points.
The difference in having an excellent credit score, a 750 or higher, compared to a poor one, 649 and lower, on the average annual auto insurance policy is approximately $1045 annually. That’s based on a Consumer Reports study from a few years back. So yeah, credit scores are huge when it comes to how much we pay for premiums. That the average Floridian has a worse credit score than the country as a whole doesn’t necessarily mean a lot, but it could at the individual level. It depends on where one’s credit score is as to whether the ten points worth of difference could be significant. For example, there’s no meaningful difference between a 701 and a 711-credit score because they’re both considered “good”. Dropping down just two points to a 699 one’s credit ranking from good to fair would have the potential to impact someone’s insurance costs by hundreds of dollars annually.
Without a doubt, that’s some of what’s happening with many Floridians which contributes to Florida having the third highest auto insurance premiums in the country. It’s also the one we have the most control over. It’s worth finding out what your median credit score is and if you don’t already have excellent credit, seeing what you could do to improve your score. Improving your credit standing makes life cheaper all of the way around, from loans to insurance products and even deposits for utilities and various services.
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