If you've called for homeowners insurance quotes recently, you might have been surprised when you were asked for your date of birth and previous address -- or maybe even your social security number -- so the company could run an insurance score report for the quote. Auto insurance companies have been using them for a while, but companies are now starting to incorporate them into their homeowners products as well, so it's important to understand how it will affect your premium.
What is an insurance score?
When people think scores, their first thought usually lingers toward credit. While credit does play a part in your insurance score, it's not the only variable. Your prior insurance and claims history also come together to create a number that rewards you for having good history.
Credit comes into play when a carrier tries to anticipate the behavior of their customers. Research shows that customers who are careful with managing their money are less likely to have a claim and also less likely to file a claim. An insurance score will rate you on late payments, debt, credit lifespan, bankruptcies and other information, though they generally only take the past 12 months into heavy account.
How does it affect your premium?
An insurance carrier will use your insurance score to determine what type of risk you'll be. Risk is used as a general term since all homes are considered risks; a carrier always has to think of the worst-case scenario to make sure they're financially prepared to cover a catastrophic loss. In this case, it's factored into the company's risk rater the same as your home's construction.
Is having a low insurance score bad?
Not necessarily. The majority of insurance companies won't penalize you for having a low insurance score. Instead, they will classify their customers based on what their score is and offer discounts to their customers that have a good insurance score. So, if you're a new homeowner or just got your license for the first time then you can look forward to savings down the road, assuming your history stays clean.
The biggest takeaway is that the company is looking to see how likely an insured is to make a claim. Higher scores indicate they believe a person is less likely to make a claim than someone with a lower claim. Not all companies use insurance scores, but since they're becoming more popular it's important to be educated on how your score affects your policy.Share