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Before we get to the connection between credit scores and car insurance policies, knowing a bit about credit scores will aid in the process. It is a number that signifies how credit-worthy an individual is, based on their past credits. There are a few credit bureaus that keep track of your financial transactions and come up with a three-digit number.

The score usually ranges between 300 and 900. And you would want to be close to the higher end of the spectrum. There are a few perks of a higher credit score. The credit bureaus look at your credit history and payment history, along with any delays and different types of credits, while calculating your credit score.

Relation between credit score and car insurance

Though there is no direct relation between credit score and car insurance as of now, the IRDAI is mulling over the idea. The prime reason is the constant increase in the number of insurance frauds.

Insurance companies in the country lose as much as Rs. 30,000 crores every year owing to insurance fraud. From a pure numbers perspective, it accounts for about 8.5% of a company’s revenue. And it should not come as a surprise that insurance companies and the IRDAI are working hard to curb this.

IRDAI aims to make insurance fraud one of the parameters for calculating an individual's credit score. Since all financial entities rely on this score to decide the creditworthiness of an individual, the proposed step could be a significant step in curbing fraud.

Implementation plans

The proposed changes will be in correlation with the Credit Information Companies Act of 2005, Credit Information Companies Rule of 2006, and Credit Information Companies Regulation of 2006.

If IRDAI proceeds with this proposal, all insurance companies must be members of at least one credit bureau. And the insurance companies would provide information about borrowers and insurance frauds. And this information will be shared on a monthly basis.

Impact on car insurance premium

Your credit score does not impact your car insurance premium yet until IRDAI’s proposal is accepted. However, the following parameters do have an impact on your car insurance premium.

1. IDV:

The insured declared value of the car is its current market valuation, including depreciation. A higher IDV results in a higher car insurance premium and vice versa.

2. Age of vehicle:

The repair costs of a brand-new vehicle are usually a bit high compared to a car that has been used for a while. For this reason, the age of your car plays an important role.

3. Coverage:

You can buy either a third-party liability policy, a comprehensive policy, or a pay-as-you-drive policy. The premium of your policy will largely depend on the coverage that you opt for.


Your credit score does not have any impact on the car insurance premium. However, it does impact your car loan. A lower score will result in a higher interest rate on the loan and vice versa. Irrespective of this, keeping a close eye on your credit score might be a good idea because you never know when the two get linked, and your car insurance premiums might be affected by the same. So, it is better to be safe than sorry.

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Disclaimer: The content provided is for education and informational purpose only, none of the information contained in our blog amounts to any form of opinion or advice. Please go through policy related documents carefully or consult an expert before making any insurance-related decisions.


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