What is an insurance score and how it is calculated?

If you’ve spent much of your adult life obsessing over your credit score, you need a new hobby – like fretting over your insurance credit score.

That’s right. Insurance scores are a thing, and they affect how high or low your insurance premiums go. So if you’re looking to buy car insurance, or looking to get any insurance, really, you’ll want to know about insurance scores.

So here are the answers to the questions we think you likely have.

What is an insurance score?

In a nutshell, an insurance score is a number that the insurance industry comes up with, to determine whether you’re likely to be somebody who is prone to accidents and misfortune  -- in other words, are you going to file a lot of claims, or somebody who has little chance of ever filing a claim. In other words, the insurance score plays a role in determining whether you’re going to have a high monthly premium, a low one or something in between.

Every type of insurance company looks at your insurance score, and so if you’re looking to buy auto insurance, or health insurance or homeowners’ insurance or life insurance or business interruption insurance or – OK, you get the idea. Your insurance score affects all types of insurance.

What is the difference between an insurance score and a credit score?

There isn’t a big difference in spirit. Sure, the industries aren’t the same, and each industry has its own unique algorithms to come up with the scores. But the goal for an insurance score and a credit score are the same – to determine how risky you are (to either insure or lend money to).

But an insurance score and credit score are alike, or at least connected, in another way. If you have a high or low credit score, that can affect your insurance score.

That’s right. If you have a terrible credit score that can lower your insurance score, which means your premiums can go up.

It may sound terribly unfair that because you had some money management problems in the past and, say, didn’t pay several bills on time, that that would affect your car insurance premium, when you’ve, say, never even had a speeding ticket, but that’s just how the industry works.

And interestingly enough – a speeding ticket won’t make your insurance score go down. Filing claims for auto damage, however, will bang up your insurance score and ultimately make your car insurance premium go higher.

How is an insurance score determined?

There isn’t a lot of transparency in how insurance scores are determined. That said, insurers have two property claim databases – the Automated Property Loss Underwriting System, also known as A-PLUS, and the Comprehensive Loss Underwriting Exchange, known as CLUE. Insurers use the information in those databases to come up with your score.

But keep in mind that while insurance scores are influenced by your past history of claims and your credit score, there are a lot of factors that go into how your insurance score is determined.

Your age matters (are you a seasoned driver, or did you just learn to drive a couple years ago?). It may seem crazy, but your marital status, your education and even your gender can come into play with raising or lowering your insurance score.

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.

Can I find out what my insurance score is?

It isn’t easy, in the way that getting a free credit score used to be difficult (but now, just about everybody these days seems to be handing them out). You could get your insurance score by paying for it. For instance, you could pay $24.95 a month with MyFico, and for that, you’d get your auto insurance score and other credit scores and identity theft monitoring and so on.

But that said, if you’re really interested in trying to figure out your insurance score, you can sort of beat the system and get a free copy of you’re A-PLUS report and your CLUE report, two important ingredients in calculating your insurance score, and those reports would give you a good sense of how healthy your insurance score is (but neither report actually gives you your score). By law, everybody is entitled to one free copy of each report a year.

You can get the free copy of the A-PLUS report by going to the website of Verisk, 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 might be worth getting the copies and looking them over, just to make sure that each report has accurate information. If somebody else’s claim has somehow wound up on your report that could definitely negatively affect your credit score.

I am not that ambitious. Do I really have to do all that legwork to find out my insurance score? Isn’t there an easier way?

Well, yes and no. You do have to do some digging if you really want to know your insurance score. But honestly, you probably already have a pretty good idea of what your insurance score is, or you can get a sense of what it is, without doing any of that.

Ask yourself this. Do you pay your bills on time and never get calls from debt collectors? And in general, your credit score, as far as you know, is it high? And have you been accident free for the most part over the years?

If the answers are, “yes, yes and yes,” then congratulations – you almost certainly have a high insurance score.

If your answers are “no, no and no, and in fact, I’m so close to some debt collectors that we exchange holiday cards,” then, sorry to hear that – and you probably have an insurance score that you wouldn’t want to brag about to your friends and family.

How can I improve my insurance score?

You can do it in two ways, and you probably guess how. First, try to drive safely and be safe on the road. You know, use your turn signal every once in a while. Become friends with the left lane on the freeway. In general, you want to be a safe driver and a safe homeowner and all around safe person. Do that, and you’ll likely file fewer claims in your life, and your insurance score will stay high, and your premiums will go low.

That said, if you do have a car wreck or a tree falls on your house, you should use your insurance and file a claim. Yes, your insurance score may drop, but insurance is there for a reason. If you need it, use it.

But don’t be reckless, and your insurance score will likely stay up.

Secondly – get your financial house in order. If you’re three months behind on your credit card payments, it’s that sort of money maneuver that is going to bring your insurance score way down. No, it isn’t fair, on many levels. But, still, these algorithms are designed to look for reckless behavior. If you have a lousy few months due to a global pandemic and are otherwise paying bills on time, it’s unlikely that your insurance score will plummet to the depths of the Earth (or remain there for long).

But if you have a lifetime habit of missing payments and of having revolving credit card debt, getting your finances back on track will help your insurance score climb and your car insurance premiums drop. Likewise, your credit score will also go up, and you’ll be able to borrow money for better, lower rates. Which means you will finally be able to stop obsessing about your credit score and your insurance score.