Identity Theft & Car Insurance: What You Need to Know

Identify theft and car insurance

In 2019, the US had 14.4 million identity theft victims. Among other devastating consequences, identity theft can severely impact your credit score, which can cause your auto insurance rates to soar. Repairing the aftermath of identity fraud can take months or even years.

If you live in California, Hawaii, or Massachusetts, you may be in luck. Car insurers in these states are not permitted to check your credit. In most other parts of the country however, carriers could double or even triple your policy rates as a result.

Fortunately, there are still ways to minimize car insurance rates if you’re a victim of identity theft. Depending on how severely the incident has impacted your credit score, you can still find companies that offer cheap car insurance.

How Does Identity Theft Affect My Car Insurance?

Identity theft can affect your credit score, one significant factor that impacts your car insurance rates. Most insurers examine your credit to determine your rates. In many identity theft cases, victims suffer from lower credit scores until they can resolve the circumstances.

Besides your credit rating, insurers will also consider your driving record, claims history, address, tickets, accidents, and other relevant demographics. On the other hand you may qualify for discounts that can help lower your premiums.

Because so many factors can contribute to your premium rate, the definitive answer to how identity theft will impact your car insurance will depend on your unique profile and circumstances.

Where Can I Report Identity Theft?

At the Federal Trade Commission, you can report an instance of identity theft and receive a personalized recovery plan. IdentityTheft.gov offers additional resources that can guide you through the necessary steps to restore your identity.

You’ll receive helpful resources, such as prewritten letters for creditors, progress tracking, checklists, and the ability to update your recovery plan.

In some cases, you’ll want to report identity theft to the local police. If you know the person stealing your identity, they used your name with the police, or a credit company requests a police report, you’ll need to visit the local station.

Identity Theft Coverage and Car Insurance Policies

Usually, auto insurance policies don’t include coverage for identity theft cases. Many banks and credit lenders offer cardholders identity theft protection. But, if your bank doesn’t provide coverage, you can get an identity theft endorsement on your homeowners or renters insurance policy.

Most auto insurers use your credit-based insurance score to determine your likelihood of filing a claim. This risk assessment strategy enables insurance providers to minimize their losses. Fortunately, laws prohibit insurers from setting premiums based solely on your credit score.

The good news is, even if you have poor credit following an identity theft incident, you can still find insurers with cheap car insurance rates. They just may not be with some of the bigger names in the industry. If you’re looking for the right fit for you, simply enter your ZIP below and find the best rates in just a few minutes.

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The Difference Between a Credit Score and Insurance Score

Credit-based auto insurance scores are different than your standard credit score. Insurance credit scores contain information from your credit report, but insurers weigh the factors differently than a credit lender would.

Insurers typically evaluate five factors from your credit report to determine your insurance score.

  1. Payment history
  2. Length of credit history
  3. Outstanding debt
  4. The pursuit of new accounts
  5. Credit mix

In some cases, your standard credit score and insurance score can vary substantially. One score could be significantly higher or lower than the other.

How Does Identity Theft Affect My Credit Score?

In many cases, identity theft can affect your credit score, credit report, and, consequently, your insurance score. Some activities that impact your credit report include:

  • Opening new lines of credit
  • Frequent credit applications
  • Past-due accounts
  • Excessive debt
  • Late payments
  • Accounts in collection

Over 45% of identity theft victims reported credit card fraud by scammers opening new accounts under their names. These new accounts and unpaid balances often have negative impacts on the cardholder’s credit.

In the US, identity theft occurs most frequently in Georgia, Florida, and California. These three states rank highest in identity fraud cases for the entire nation.

Luckily, several US car insurance companies offer low premiums for drivers with less than favorable credit.

Your Insurance Score and Your Car Insurance

In each state, your insurance score will affect your premiums in different ways. Your rates may even vary depending on your city. In more than half of all states, drivers pay an average of $1,000 more if they have a low credit score compared to a good credit score.

According to statistics, the most significant average rate increases for drivers with bad credit tend to be highest in Michigan, Kentucky, New Jersey, New York, and Louisiana.

Drivers in North Carolina, Iowa, Wyoming, Virginia, and Alaska typically experience the lowest auto insurance premium increases with a poor credit score.

However, these statistics only reveal average rates and don’t account for your unique driver profile. That’s why it’s essential to shop around for the best rates by comparing quotes using your data.

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The 3 Best Car Insurance Companies for Bad Credit

Your car insurance premiums will depend on your unique driver profile, which is why we always recommend obtaining quotes from multiple carriers.

Below are some of the insurers who offer cheap car insurance to drivers with a poor credit score following identity theft.

1. Dairyland

Dairyland Insurance makes it their priority to help drivers with poor credit and other attributes other companies may see as “high risk” get cheap auto insurance coverage. One of the leaders in “non-standard” car insurance, you’re sure to find favorable rates with Dairyland compared to some of the bigger names in the industry.

Whether you have bad credit or a lot of accidents on your record, Dairyland is definitely one of the companies you should be considering. Helping drivers like you is the company’s speciality.

2. Nationwide

Nationwide has some of the most affordable premium rates for drivers with bad credit. The insurer bases rates on your age, gender, occupation, driving record, claims history, vehicle, and location.

In many cases, Nationwide has the lowest rates in the states below.

One advantage Nationwide offers is premium reconsideration. For example, if you experience an extraordinary life circumstance, such as a divorce, moving abroad, or a catastrophic emergency, you may have some wiggle room to get your premium lowered.

3. GEICO

Another car insurer with low rates for drivers that have poor credit is GEICO. In addition to your credit-based insurance score, GEICO also considers your vehicle profile, driving record, claims history, driving experience, and location.

If exceptional circumstances resulted in negative impacts on your car insurance, GEICO is one of the few auto insurers that will overlook the event when setting your premium rate.

Identity theft counts as an extraordinary life event at GEICO. Also, temporary unemployment, deployment overseas, divorce, death of a family member, and catastrophic circumstances won’t result in rate increases.

Exceptional Life Circumstances

Some insurers make no exceptions when it comes to unique circumstances that impact your credit-based insurance score. However, most car insurance companies understand that scoring is supposed to identify drivers with a bad credit history, not drivers undergoing exceptional life circumstances.

Identity theft qualifies as an unexpected life event. Speaking to your auto insurance agent about reevaluating your rates for an exemption could help you secure lower premiums.

If your carrier responds adversely, you can always compare quotes with other auto insurers. Your insurer should provide your insurance credit score and list four or more reasons why your request was denied.

Many consumers experience errors on their credit reports that include missing information and other inaccuracies. By checking the report yourself, you’ll have the opportunity to correct any mistakes, improve your insurance score, and lower your premiums.

While many insurers grant exceptions for extraordinary life circumstances, some don’t. Most consumers check for three quotes or less before making a choice. But, comparing a dozen or more quotes every six months is one of the best ways to find the best deals on car insurance.

How to Get Cheaper Car Insurance with Bad Credit

In addition to searching for the most affordable car insurer in your area for your vehicle and driving history, there are other ways to reduce your rates.

If you have bad credit, consider the options below to lower your premiums.

  • Ask for Discounts – Almost every insurer offers various discount options from policy bundling to good driver discounts. You can find out which deals you qualify for by asking your local agent.
  • Pay in Full – Many auto insurance companies offer a discount when you pay your annual premiums in full upfront instead of monthly payments.
  • Change Coverage – Reduce your coverage limits to the minimal requirements and consider raising your deductible for lower rates.
  • Compare Quotes – Comparing quotes from multiple insurers can help you get the cheapest premium rates. Prices can change as often as every six months, making it worthwhile to switch providers.

You can instantly compare dozens of auto insurance rates in your area using our convenient quoting tool. Car insurance rates can vary widely among insurers, states, cities, and even ZIP codes, which is why we always recommend getting multiple quotes.

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4 Tips to Improve Your Credit After Identity Theft

Following an identity theft incident that damages your credit, you can take the following steps to get back on track and reduce your car insurance rates.

  1. Use Automatic Bill Pay – By setting up automatic payments, you can start to correct a history of late payments.
  2. Refrain From Opening New Accounts – Applying for new lines of credit could show up as an inquiry on your credit report.
  3. Dispute Errors – It’s your right to receive a free copy of your annual credit report. If you suspect identity theft, you can view fraudulent events on the report and start to take action to correct them.
  4. Work with a Credit Agency – Credit agencies can help you improve your credit rating by adding consistently on-time payments to your credit report.

Taking all of the necessary steps following an identity theft incident can help you restore your credit and secure the lowest rates with insurers.

Identity Theft and Car Insurance FAQ

Am I responsible if someone steal’s my identity?

Typically, you face limited liability for any debts resulting from identity theft. Most states limit your liability to $50. You may also consider placing a 1-year fraud alert on your credit report for future protection.

Could someone use my car registration to steal my identity?

Using your car registration and Vehicle Identification Number (VIN), an individual could steal your vehicle and potentially attempt to steal your identity.

What can my insurer do if my car is stolen?

If you have comprehensive auto coverage, your insurer may help reimburse you for the actual cash value of your stolen vehicle.

Do my car insurance premiums go up if my identity is stolen?

Your auto insurer could raise your rates at renewal time if your identity is stolen, and your credit suffers as a result. Shopping around by comparing quotes can help you get a lower premium.

Additional Resources for Identity Theft

The following additional resources can be useful if you, or someone you know, experiences identity theft.

Final Thoughts

Identity theft doesn’t have to ruin your chances of getting affordable car insurance rates. By comparing quotes based on your unique driver profile and vehicle, you can still find cheap car insurance with bad credit.

Every insurer offers different rates in various ZIP codes and weighs pricing factors according to distinct formulas. Compare car insurance rates instantly with our quoting tool, or simply enter your ZIP code below to get started.

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