What is an insurance score?

An insurance score is calculated using some information found in your credit history. Statistically, some pieces of credit information relate to the likelihood that you will file a claimAn insurance claim is a request you make to your insurance company for coverage after your car is damaged or you have an accident. You can file a claim online, by phone, or in writing.. Insurance companies use a calculation based on those statistically significant credit factors to create an insurance score. It's a credit score that's designed specifically for insurance companies.

When you apply for auto insurance or home insurance, your insurance score will be factored into your rates. Similar to how your credit score will impact the kind of interest rate you get a loan, your insurance score will impact how much you are charged in premiums.

Insurance score vs. credit score

An insurance score and credit score are alike, or at least connected, in some ways. If you have a high or low credit score, that can affect your insurance score. Both of these scores use information that is taken from your credit report to determine the risk you represent. It's also known as a credit-based insurance score.

The main difference between a credit score and an insurance score is the type of information that is used. When an insurance company runs your insurance score, it's not the same as having a credit check done for a loan. It doesn't affect your credit score or appear on your credit history.

While a credit score can be the sole reason for being denied a loan, insurance companies can't use a credit-based insurance score as the sole reason to turn you down for coverage.

How is an insurance score calculated?

There isn’t a lot of transparency in how insurance scores are determined. Insurance companies generally use information from two sources for the calculation of your insurance score.

The first is your credit report, although again they aren't always looking at the same things as say, a bank would for a loan.

The second is your claims history, which is usually pulled from a shared database such as the Comprehensive Loss Underwriting Exchange (CLUE) or A-PLUS report.

From there, how they weigh the data that is gathered and exactly how it affects your rates varies by company.

What affects your insurance score?

Insurance score factors are taken from the same report used to create your FICO score. According to the National Association of Insurance Commissioners (NAIC), the factors that affect your insurance score are as follows:

  • Payment history (40%): Your history of making payments on time. 
  • Outstanding debt (30%): The amount of debt you have right now, 
  • Credit history length (15%): How long you have had a credit history.  
  • Pursuit of new credit (10%): Recent applications for new credit. 
  • Credit mix (5%):The mixture of different types of credit you have, like car loans, credit cards and mortgages. 

How can I find my insurance score?

While you probably won't be able to get the exact number calculated by the insurance company, you can get copies of the reports that are used to develop it.

You can get a free copy of your A-PLUS report by going to the Verisk website, an analytics company. Or you can call them at 800-627-3487.

You can get your free copy of CLUE by going to the LexisNexis website or by calling 1-866-312-8076.

It's fairly easy to get a copy of your credit report. Most credit card companies offer a free service that monitors your score. Additionally, you are entitled to one free copy of your credit report and score every year.

Keeping an eye on your credit report and claims report is a good idea. A mistake on either of those reports can be very costly to you. As a general rule, if you have a good FICO score you will also have a good insurance score.

It's important to know that if the insurance company does increase your rates (called an adverse action) because of anything found in your credit report, then by law it has to inform you. You will receive a letter notifying you that your credit report has had an adverse affect on your insurance rates. That letter must list the reasons why your rates are higher. When you receive that letter, you are entitled to a free copy of the reports used to calculate your rates, and the letter will explain how to get those reports.

What is a good insurance score?

If you have an insurance score of 770 or more, you’re considered to have a good insurance score, and you’ll get lower rates. However, the range of insurance scores also depends on the credit monitoring agency providing the data to your insurance company.

How insurance companies calculate insurance scores and what each considers to be a good score will differ a little. However, it's usually safe to assume that if you have a good FICO score, you will also have a good credit-based insurance score.

How to improve your insurance score

You can improve your insurance score in the same way that you would improve your overall credit score. Be sure to pay your bills on time, keep a good debt-to-credit ratio (meaning you aren't using too much of your available credit), and don't apply for new credit too often.

It's also important to avoid filing unnecessary claims; if it's not too far above your deductibleThe deductible is the amount you pay out of pocket for a covered loss when you file a claim., consider covering the damage out of pocket. too many claims will hurt your insurance rates.

Your insurance score is not recalculated mid-term and won't affect your rates until renewal. However, if your credit score has gone up, it's a good time to shop around and compare rates, as that change will have an immediate effect on new insurance quotes.

How does my insurance score affect my premium?

Your insurance score affects your premiumThe payment required for an insurance policy to remain in force. Auto insurance premiums are quoted for either 6-month or annual policy periods. in a simple way: a higher insurance score means lower rates and a lower insurance score means higher rates. It works in much the same way that a high credit score will earn you a lower interest rate when you take out a loan.

Of course, unlike a loan, your credit-based insurance score isn't the main factor in determining your interest rate.

Insurance score: Frequently asked questions

How high or low can an insurance score go?

Depending on the company that is issuing the insurance score, an insurance score range can go as low as 200 and as high as 997. If you have an insurance score of 770 or more, you’re considered to have a good insurance score, and so you’ll get lower rates. If you have a score of 500 or less, you’re going to pay higher insurance rates.

Does my insurance score affect my credit?

No. Your insurance score has no impact on your credit score, although the reverse is true; your credit score and what is on that report do impact your insurance score.

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