Will a Credit Freeze Make It Harder to Get Insurance? Here’s What Suze Orman Says

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KEY POINTS

  • A credit freeze can protect you from fraud.
  • It could also end up being a barrier to getting life insurance. 
  • You can temporarily unfreeze your credit while you apply for insurance, so insurers can see your credit history to evaluate you as an applicant. 


The quick answer? It could. But there's also a solution to that.

There may come a point in time when you decide to freeze your credit. Maybe your data was compromised in the course of a massive breach. Or maybe you checked your credit report, saw that someone had opened a new credit card in your name, and got really spooked.

What a credit freeze does is prevent outside parties from accessing your credit report. That's an important thing, because if someone gets access to your Social Security number and other personal identifying information, they might use it to try to open a new loan or line of credit in your name that they benefit from. But if you have a credit freeze in place, they won't be able to. 

But while a credit freeze might offer you some protection, it could actually make the process of getting life insurance more difficult, says financial guru Suze Orman. Here's why.

Life insurance companies want to know your credit history

It makes sense that a credit card company or lender would want to know what your credit history looks like before agreeing to loan you money or extend a line of credit to you. But it may surprise you to learn that life insurance companies commonly do a credit check before writing policies.

If this doesn't seem to make a lot of sense, well, that makes sense. After all, with life insurance, you're paying money in exchange for financial protection. You're not borrowing money, so why should it matter what your credit score looks like?

The thing is, though, insurance companies might use your credit history as an indication of how risky you are as an insured person. They might think that if you've lived on the edge financially in the past, you might also live on the edge physically. Whether that's fair or not, the reality is that life insurance companies commonly check applicants' credit before issuing policies. And so if you have a credit freeze in place, that could stall your application, warns Orman.

A simple solution

If you've frozen your credit and are applying for life insurance, all you really need to do is unlock that credit freeze after putting in your applications. You'll generally be given a PIN you can use to unfreeze your credit temporarily and give outside parties access to your credit report. Then, once the insurance company you've applied with gets the information they need, you can put your credit freeze back in place.

If you're unwilling to unfreeze your credit for a life insurance company to check your history, then you may be denied a policy. That's not guaranteed to happen, but it could.

What’s more, if you have a solid credit history, it's in your best interest to share that information with the life insurance company you're applying with. It could result in lower premium rates.

For better or worse, Orman says, life insurance companies are in the habit of checking up on applicants' credit. If you've put a credit freeze in place, you'll need to be prepared to undo it temporarily so your life insurance application can be processed. 

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