Your Guide To Property Insurance

3 Things to Know About Insurance Scores

When you apply for a loan or credit card, the lender will probably check your credit score. Most people are familiar with credit scores and why lenders check them, but many people do not know that insurance companies use insurance scores. Have you ever heard this before? If not, it might be helpful for you to learn what an insurance score is, why insurance agents use them, and the effects they have.  

1. What It Is

Your credit score reveals your creditworthiness, while an insurance score reveals your risk level. When a person applies for insurance coverage, the agent working on the quote must consider many factors before offering a solid quote. One factor is the person's insurance score. Insurance companies use various models for insurance score ratings, but most range from 200 to 997. Depending on the model and the insurance company, a score of 700 or 750 is usually considered a great score. Scores that fall under 500 might be considered poor.

2. Things that Affect Your Score

Your insurance score is not based on your driving history or claim record. Instead, it is a compilation of your credit history. While it is not a credit score, it is very similar to a credit score. Things like a past bankruptcy or foreclosure on your credit report drop your insurance score. Great money-management skills over the years can help increase your insurance score. Your insurance score will likely be similar to your credit score in terms of numbers. Therefore, if you want to know your insurance score, look up your credit score.

3. How Insurance Companies Use It

Insurance companies use insurance scores to calculate quotes, but you might still be wondering how your credit affects your driving. Insurance rates are based almost completely on risk levels, which come primarily from statistics. Statistical information reveals that people with poor credit have higher risks. As a result, a person with a low insurance score will pay more for their insurance coverage. Statistically, people with great credit have lower risks of accidents and tickets. Therefore, they pay less for their insurance.

If you want to pay lower rates for your insurance, you might want to start working on your credit score. By improving your credit score, you can improve your insurance score. As a result, you can save money on your premiums. You can learn more about insurance ratings and costs by contacting a local insurance agency.