What is an Insurance Score?

by | Oct 19, 2022 | Insurance Blog

Most people have heard of a credit score, a mathematical scoring model used to predict the likelihood of paying back loans, but have you heard of an insurance score? You may not know this, but people have credit-based insurance scores too. Credit-based insurance scores are used to evaluate the possible level of risk for a potential customer.

While credit scores factor in things like your job history, income, and other personal factors, an insurance score leaves those things out and focuses on getting you an insurance premium that works with your life. With insurance scores, no one gets denied based on poor scores.

Keep in mind, not all states allow insurance scores to be used to determine auto and homeowner insurance rates. California, Massachusetts, Michigan, and Hawaii do not allow insurance scores to determine auto insurance premiums. Similarly, California, Massachusetts, and Maryland do not allow insurance scores to determine homeowners’ insurance premiums.

What is a Good Insurance Score?

Insurance scores are measured numerically, and the number indicates how likely an insurance customer is to file a claim or not. Insurance claims are risky for insurance companies, so calculating risk is important.

When it comes to insurance scores, a higher score means a customer is less likely to file an insurance claim. Fewer insurance claims filed through insurance companies mean more money in both the pockets of the companies and consumers.

Insurance scores impact how much an insurance customer will pay for their premiums. If an insurance company sees that a customer has a low insurance score, they tend to rack up the insurance premium to cover their potential loss.

Different insurance companies have different standards when it comes to the numeric value of an insurance score. Generally speaking, a good insurance score is anything over 750.

How Can I Improve My Insurance Score?

Insurance scores are calculated using many variables. The first variable is the customer’s payment history.

Payment history is one of the main factors in determining a credit score, but it factors into an insurance score too. Insurance scores pull payment histories because it shows a pattern of good, or not so good, faith.

The next thing companies look at is a customer’s outstanding debt. This means how much money the customer owes to various creditors and companies.

Next, the length of the customer’s credit history is taken into consideration. Not only is it important to make payments on time, but it is equally important to have a long and stable credit history over time.

Not only does past history factor into an insurance score, but future history does as well. A customer’s pursuit of new credit is just as important.

Finally, insurance companies will also take a look at how many insurance claims a potential customer has filed over the years.

Following the same principles that allow you to improve your credit score, you can improve your insurance score too. Being as financially responsible as you can be, allows both your credit and insurance scores to thrive.

Insurance Scores vs. Credit Scores

An insurance score lets insurance companies know about the potential risk a new customer poses. A credit score shows the probability a person has of paying back their loans. Both scores indicate how risky the investment in a customer is, but for different reasons.

To put it simply, a credit score looks at your ability to repay the amounts you have already borrowed, while an insurance score looks forward to predicting how likely a client is to become involved in a future insurance claim.

See also: General Liability Insurance – What It Does and Does Not Cover

If you’re looking for an insurance agent to assist you with all of your insurance needs, then TSL Insurance Group might be able to help.

We are an independent insurance agency serving the Louisiana area with over fifty years of experience, offering many types of insurance products, from homeowners, auto, life, RV, flood and more, for both personal and commercial needs. Fill out the form below to set up an appointment with our insurance agent today!