If you’ve ever wondered why your insurance rates are what they are—even with a clean record—your insurance score might be the reason.
Since the early 1990s, insurance companies have been using insurance scores to help determine your risk as a customer. But what exactly is an insurance score, how is it calculated, and what can you do to improve it? Let’s break it down.
What Is an Insurance Score?
An
insurance score is a
numerical rating used by insurance companies to predict how likely you are to file a claim. It’s based on historical data and is designed to estimate your potential risk as a policyholder.
In short: the lower your risk, the better your insurance score—and usually, the better your rates.
It’s important to note that
each insurance company uses its own proprietary algorithm, which means your insurance score can vary from one carrier to another. Some companies weigh the insurance score heavily when calculating your premium, while others may only consider it as one of many factors.
How Is Your Insurance Score Calculated?
Your insurance score is made up of multiple data points. While the exact formula varies, here are some of the
most common factors used:
1.
Credit History
Your credit history is a major factor—but this is
not your actual credit score. Insurers use a specialized version that looks at patterns like timely payments, outstanding debt, and account history. Importantly,
a formal credit report is never pulled, so this won't show up as a hard inquiry.
2.
Driving Record
For auto insurance especially, your driving history plays a big role. Accidents, tickets, and violations can all bring your score down.
3.
Insurance History
Frequent claims or
gaps in coverage can hurt your score. Stability and consistency in your insurance history reflect positively.
4.
Location
Where you live matters. Your
city and ZIP code can influence your risk profile based on crime rates, traffic, weather patterns, and more.
5.
Homeownership
Insurance companies often view homeowners as more stable and less risky than renters, which can lead to a higher insurance score.
6.
Age & Gender
Whether fair or not,
younger male drivers are statistically seen as higher risk, and that factors into the score—even with a perfect record.
Why Does Your Insurance Score Matter?
Insurance scores help carriers determine
how much you’ll pay for coverage. A higher score often means
lower premiums, while a lower score can lead to
higher rates or even policy denial.
In today’s market, insurance scores are
not going away—so understanding how to improve yours is key to saving money on your policy.
4 Tips to Improve Your Insurance Score
Here are four practical steps you can take to improve your insurance score:
1.
Keep Your Credit in Good Standing
Make payments on time, keep balances low, and avoid opening unnecessary accounts. Even though it’s not your official credit score, your financial habits still matter.
2.
Maintain a Clean Driving Record
Avoid accidents and traffic violations whenever possible. Safe driving pays off in more ways than one.
3.
Don’t Let Your Insurance Policies Lapse
Even a short lapse in coverage can negatively affect your insurance score. Keep your policies active, even if you're switching carriers.
4.
Limit Claims to What’s Truly Necessary
Small claims can lead to higher premiums or a lower score. When possible, cover minor losses out-of-pocket to keep your record clean.
Final Thoughts
Your
insurance score plays a key role in how insurance companies assess your risk and set your rates. While you can’t control every factor, staying informed and making smart decisions can go a long way in improving your score—and ultimately saving you money.
If you have questions about how your score may be impacting your insurance costs, feel free to reach out. We’re here to help you make sense of it all.
📞 Need help reviewing your insurance options or understanding your insurance score? Contact us today—we’re happy to walk you through it.
