Insurance scores are an important part of your home and auto insurance that not many people are familiar with. Below we’ve compiled some common questions to keep you better informed.
What is it used for and why does it matter?
It’s a numerical rating assigned to you by agencies to determine how risky you are to insure. Insurers use your score as the main way to predict how you are to file a claim that will cost them money. Higher scores indicate you are a safer bet to insure and will be less likely to file a claim, while the opposite is true for lower scores. Your score is the main factor that determines what your monthly / annual premiums will be.
How is the insurance score calculated?
Your credit rating and accident history (particularly at-fault accidents), as well as claims history with past insurers are the primary determinants of your score. Your history of coverage also matters – lapses in coverage and late / missing payments of premiums can hurt your score.
What is a good insurance score?
Scores range from 200 – 999, with “good” scores above 770. You may qualify for cheaper premiums with some insurers if your score is in the 700-800 range, but if your score is significantly lower (below 500), you could end up paying higher premiums.
How do you find out what your insurance score is?
Every agency uses different formulas to calculate your score. These companies usually don’t disclose the exact number to you when you get a quote, so it’s difficult to know your precise score like you can for a traditional credit score. In general, if you have a good credit score and haven’t had any claims for the past few years, it’s likely that you have a good insurance score and will be able to qualify for lower premiums.
How do you improve your insurance score? Does it change?
Your score is not permanent and can change over time. In general, you can build and maintain a great score by making fewer claims on your insurance. However, improving your credit score will also help your insurance score. Below is a list of several steps you can take to improve your score:
- Make credit card, mortgage and other loan payments on time
- Don’t carry high balances on credit cards
- Keep credit accounts open to build credit history
- Have several different types of credit accounts, such as multiple credit cards.
- Don’t apply for new credit accounts (credit cards and other loans) too frequently
Maintaining a good score is an important part of getting the best rates on your home and auto insurance. While it can be hard to know what your score currently is, it can be approximated, and you have a variety of options and tools to keep it in good shape so you qualify for the best insurance rates.
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