A recent survey has revealed that the average annual cost of motorcycle insurance in the US is $702. But this figure varies depending on your location, age, and many other factors. The figure could be much higher. In California, for example, the average cost is $1,360 every year.
Did you know that you can reduce the cost of your motorcycle insurance by boosting your credit score?
It turns out that credit score is a significant predictor of risk, and insurance companies use it to determine the premium for both auto and motorcycle insurance. We will tell you why insurers consider your credit score and how you can use it to save on your motorcycle insurance. But first, here’s some information on good credit.
What good credit looks like
There are three major credit reporting agencies in the US. According to Experian, credit scores in the US range between 300 and 850. Most people fall between 600 and 750. A higher score is better. When your credit score is high, it means your credit is good. Financial institutions are more confident that you can meet your debt obligations. Lenders may vary in their criteria of defining good credit. However, generally, a higher credit score will translate to better lending terms.
Many factors contribute to your credit score. We will tell you how to boost it. But first, we will let you know why insurers use the credit score to determine your motorcycle premiums. We will also inform you how to use your credit score to bring down your motorcycle insurance rate.
Why do insurers use credit scores to determine motorcycle insurance rates?
Many auto insurance companies in the US use credit-based insurance scores to determine risk. Only the states of Hawaii, California, Michigan, and Massachusetts have limited or outlawed the practice. A credit-based insurance score means that the lower your credit score, the higher the risk. People who have bad credit have a high chance of filing a claim.
There is scientific evidence to support this thinking by insurers. Experts say that mathematical measurement of how a person manages their finances (for example, credit score) are excellent predictors of risk. People who are prudent about servicing their debts, saving, and budgeting are less likely to indulge in risky behavior. Plus, they are less likely to file insurance claims.
Research done by the Federal Trade Commission confirmed this position. It revealed that credit history is an accurate and effective predictor of risk.
How to save on motorcycle insurance by having good credit
Unless you live in Hawaii, California, Michigan, or Massachusetts, your motorcycle insurer will likely run a soft credit inquiry before proposing a quote. A bad score will translate to higher risk and a higher premium. On the other hand, a good score means that you are less likely to file a claim. The insurer will charge less for coverage.
To save on your motorcycle insurance, improve your credit score by taking the following steps:
- Make at least the minimum payment on all your debts on time.
- Keep your credit card balances low.
- Only apply for credit when you need it.
- Review your credit report regularly and be proactive about improving the scores.
- Work with a reputable financial advisor to turn around a low credit score.
What else determines your motorcycle insurance rate?
The Motorcycle Safety Lawyers told us that only a handful of states have taken legal measures to limit or outlaw the use of credit-based insurance scores. Other states generally accept its use but prohibit insurers from using it as the only criteria for determining the premium. So, even if a credit-based insurance score is acceptable in your state, it is only one piece of the puzzle. Other factors that determine your motorcycle insurance rate include:
- Your driving/riding record. The cleaner your driving record is the lower the motorcycle insurance rate.
- Your age. Older riders are often considered less risky, and their rate will be lower.
- Your location. From the survey, North Dakota had the lowest average motorcycle insurance rate at $382 per year. California had the highest average rate at $1,360 per year.
But, there is a lot more you can do to reduce your motorcycle insurance. The following measures are entirely on your hands:
- Comparing quotes and shopping around.
- Consider bundling the coverage.
- Undertake a state-approved riders` course.
- Look for discounts.
- If you are confident about your driving, consider taking a higher comprehensive deductible.
Insurers have good reasons to use credit-based insurance scores to determine an individual’s premium rate. You can use this information to your advantage. Use the tips we have mentioned above to boost your credit score. Lenders offer better lending terms, and it will help you to save on your motorcycle insurance.
If your financial issues are complicated, like bankruptcy, consider working with an expert. They will help you achieve the same goal faster. But remember that as you boost your credit score, keep your driving/riding record clean and look for the best motorcycle insurance deals.