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Do auto insurance companies do background checks?

The lowdown...
  • When you get auto insurance quotes, the carrier won’t run any reports to verify information that’s provided
  • Anytime a consumer submits an application for coverage, an underwriter will start to assess risk and run reports
  • While a traditional background check is not run, all insurers have tools to run motor vehicle reports instantly
  • In addition to minor violations, carriers will look for criminal traffic offenses like DUI and hit-and-run convictions
  • Some carriers will also run your credit report in states where using credit to determine rates is not prohibited

Your background can affect several different aspects of your life. From getting a job to qualifying for a license, having blemishes on your criminal and credit reports can impact your future in a negative way.

Insurance is one of the few products that you’re required by law to purchase. Since it’s mandatory, you need to know how your background will affect your rates and even your ability to find insurance coverage.

Compare car insurance quotes by entering your zip code above. You might be surprised by how much you could save.

Each state has different laws pertaining to what insurance companies can look at or consider when qualifying consumers for insurance. Here’s what you need to know about insurance and background checks:

What happens when you get auto insurance quotes?

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Auto insurance quotes are estimates. They help consumers shop around and price how much a specific amount of insurance will cost on a specific vehicle.

While technology has made it possible for insurers to give consumers very accurate quotes instantly, you still have to be forthcoming when you’re soliciting quotes.

Auto insurance agents and quoting tools will ask you for loads of information to rate you properly. You will have to know the following information:

  • vehicle type
  • how it will be driven
  • how much coverage you want
  • violations reported on your driving record

While information is eventually verified, the agent won’t run any reports until after you’ve applied for the policy.

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The Underwriting Process

Once you’ve compared several different quotes, you can decide which policy offers you the best value. After you’ve made your final decision, the next step will be to submit your application to the company.

The company will then assign your application to an underwriter to start the underwriting process.

Underwriting is the process of assessing risk and verifying the rating information before a company issues a policy.

The carrier has a certain amount of time to review an application and either issue the policy or terminate the policy because of the information that’s found. This time is called the binding period.

States usually require companies to complete the binding period to be complete within 60 days.

All Insurance Companies Check Motor Vehicle Reports

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As your application is being underwritten the underwriter will start to run reports. Running motor vehicle reports to assess your past driving record is essential for the carrier to evaluate your skill as a driver and place you into a risk category.

Since companies can’t reasonably follow around each of its policyholders to grade their driving, running motor vehicle reports is the best alternative.

What is included in a motor vehicle report?

If you think about a background check, you might think about a criminal screening. Insurance companies might not check your full criminal background, but your motor vehicle report can contain criminal traffic offenses.

These charges are most important to the insurer. Criminal traffic offenses found on an MVR include:

  • Hit-and-run accidents
  • DUI or DWI
  • Reckless driving
  • Driving without a license

Not only does your motor vehicle report include criminal traffic offenses, it also includes information about your past minor traffic violations and accidents that have been reported to the DMV.

The report will show the date of the offense/accident, the conviction date, fault allocation, and total payouts.

What is a C.L.U.E report and when is it used?

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Not all accidents are reported to the DMV. Some states have threshold reporting guidelines and that means that certain claims won’t be recorded on your state motor vehicle report.

It doesn’t mean that new insurance companies won’t be able to see past claims that you’ve filed. This access to claims is why insurance carriers have access to C.L.U.E reports.

A Claims Loss Underwriting Exchange report includes data that’s collected from all of the licensed insurers in the marketplace. It’s a great tool for insurers to evaluate drivers claims histories before any company extends an offer for insurance.

Auto C.L.U.E. reports include the following information that’s been reported in the last seven years:

  • Policy type
  • Loss date
  • Loss type
  • Loss status
  • Amount paid
  • Policy number
  • Insurance company

Pretty much all insurance companies run C.L.U.E. reports. Even you can run your own report for free to see what’s on it. If you notice that something is not accurate and an error needs to be fixed, you should dispute the information as soon as possible.

You may also be able to contact the insurer directly to ask for a Loss Experience Report to give the new company the information.

Do insurance companies run your credit report?

Your credit history can affect chances of landing a job and it can also affect your insurance rates. In most states, insurance companies are free to run your credit report to assess risk and place you into a risk class.

You can’t be turned down for insurance because you have bad credit but it can lead to higher rates.

Insurance companies don’t use your traditional credit report like a credit card company or lender would. Instead, the underwriter will run your credit-based insurance score through a risk solutions company like LexisNexis to rate risk.

The report includes information on your credit but it doesn’t include information that might be considered discriminatory in nature.

Insurance companies might not run your criminal records, but they do several other relevant reports. You should take the time to run your reports on your own and see what can be found on your records.

You can run these through your state and also through LexisNexis.

After you know what might be working against you when you’re getting rate quotes, you can enter your information accurately as you’re soliciting quotes.

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