What Is Your Insurance Score and How Does It Affect You?

The Truth Behind Insurance Credit Scoring

When it comes to borrowing money and paying your bills, certain numbers matter a great deal. One of the biggest criteria that lenders check prior to offering credit or loans to a consumer is their credit score. This numerical ranking is a summary of the information that is contained in your credit report.

Criteria included in the determination of your credit score include your timeliness of paying bills, the total amount of debt that you carry, the type of debt that you hold, and the amount of new credit that you have applied for.

Credit Score Vs. Insurance Score

Credit score is not an insurance score. While most people are at least somewhat familiar with credit scores, a term that may not be so well known is one’s insurance score (also called insurance credit score). However, this particular number can play a very big part in how much you will be charged for insurance coverage over time.

credit scoring factors

Credit Scoring Factors Explained in Income vs Credit Score

Insurance Credit Score Vs. Insurance Score

There is no difference between an Insurance credit score and an insurance score. These are just two names of a numerical point system used by insurance companies to predict risk. This also helps insurers during underwriting process and in determining the amount of premium to be paid by the insured.

What Your Insurance Score Means

Your insurance score is essentially a rating that is computed and utilized by insurers. This number represents the likelihood of you filing an insurance claim during the time that you have coverage with that particular insurer.

Insurance scores can have a big impact on the amount of premium that you pay for your coverage – whether it is for health, home owners, auto or a cheap life insurance policy. In this regard, a higher insurance credit score will result in you paying a lower amount of premium, and conversely, a lower insurance score will likely result in you being charged a higher amount for coverage.

How is Your Insurance Score Determined?

Your insurance score (also known as insurance credit score) is based in large part on your overall credit rating. This is because historical data reveals that there is a distinct correlation between one’s credit rating and the amount of insurance claims that they file. The insurance score that you are ultimately given is therefore based on a combination of your credit score and your past insurance claim filing history.

For example, statistically, a person who carries a lower credit score is much more likely to file insurance claims than an individual who possesses a higher credit score figure. Likewise, an individual who possesses what is considered a “perfect” insurance score is considered to have the lowest possible risk to the insurance company of filing a claim.
insurance credit score

What is Insurance Score Range? (The Good and The Bad Score)

Insurance scores are actually generated by insurance companies. In order to research your past insurance claim filing history, an insurer has access to two property claim databases – the Automated Property Loss Underwriting System, or A-PLUS, and the Comprehensive Loss Underwriting Exchange, or CLUE.

A lot of people wonder, What is a good insurance score? The answer is, once your claims filing history and your credit score are obtained by an insurer, they are combined to generate your total insurance score. This number will range between a low of 200 and a high of 997.

  • Insurance scores that fall into the range of 770 or higher are typically considered to be good.
  • Conversely, a poor insurance score is considered to be any number below 500.

There are very few individuals who possess a perfect insurance score – although this figure is not impossible to obtain. However, it is very possible to reach a good insurance score, which leads to paying a lower amount of premium for your coverage.

What is an Auto Insurance Score?

Your auto insurance score differs from your credit score in that it takes into account all of the information that is found in your credit score, plus your past insurance history. This includes information regarding any tickets, accidents, and insurance claims that you may have filed.

Similar to the effect that your credit score has on you obtaining a loan, your auto insurance score will have a bearing on how much you will be required to pay in premium for your vehicle insurance policy. More information: Effect of Credit Scoring on Auto Insurance Underwriting and Pricing – Effect of Credit Scoring on Auto Insurance Underwriting and Pricing – PDF

What is a Good Auto Insurance Score?

Both the Fair Isaac Corporation and ChoicePoint have scales for auto insurance scoring. The auto insurance score range with the Fair Isaac Corporation is between 300 and 900. Individuals with a score that is above 700 are considered to have a good score, with those having scores above 800 considered great. The scores with ChoicePoint range between 300 and 997, with scores in the higher numbers being considered better.

Because all auto insurance companies have differing views of what constitutes a good insurance score, some insurers may offer lower premiums for scores in the 800 range, while others will only require scores in the 700 range to qualify for certain premium discounts.

Is an Insurance Financial Stability Score of 690 Considered Good?

Your insurance score is somewhat different than your credit score in that it factors in all of the criteria of your credit score, along with your past history of traffic tickets, auto accidents, and claims.

There are two providers of insurance scores. These include the Fair Isaac Corporation and ChoicePoint. The scores that are provided by Fair Isaac range between 300 and 900, with a good score being considered those that are above 700. ChoicePoint’s scores range between 300 and 997, with the better scores being those that are in the higher numbers.

Insurance companies that use financial stability discounts all have their own unique scoring systems – and, while these systems do not directly correlate to one’s exact credit score, they are primarily based on it.

With this in mind, you may be able to qualify for a policy discount from one insurance company with a score of 750, while you may only need a score of 700 in order to qualify for a discount with another.

The types of insurance policies that can be affected by your insurance credit score include home, auto, boat, motorcycle, and RV. And, if an insurance company is using the financial stability discount, it is essentially having an effect on all of your insurance policies.

Why your Insurance Score Matters

Your insurance score matters a great deal when it comes to the premium that you will be charged for insurance coverage. While a small premium difference may not seem substantial, over time, the difference in dollars can really add up.

For example, suppose that your insurance score costs you an additional $20 per month for auto insurance coverage. Over the course of just one year, you will have paid $240 in higher premiums. In just four years, your premium difference would be inching close to a total of $1,000. And, over a ten year time frame, your lower insurance credit score would have cost you close to $2,500.

How to Improve Your Insurance Score

If you currently possess a low insurance score, there is good news. There are several ways that you can improve your score – ultimately resulting in your insurance premium amounts being reduced.

One way of improving your insurance score involves increasing your credit score and history. Here, you can concentrate on paying all bills in a timely manner, and reducing your overall amount of debt. In addition, by filing fewer – or no – insurance claims over a certain period of time, you will also be taking steps to improving your overall insurance score figure.