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How Your Insurance Score Affects Your Premium

The auto insurance industry usually paves the way in trends that the home insurance market soon follows. For years, auto insurance carriers have used credit scores and MVR reports in order to attribute an insurance score to a customer. This insurance score is then used to create a more accurate risk model based on the customer’s behavior and now homeowners insurance companies are starting to follow suit. Keep reading to find out how your insurance score affects you.

How Your Insurance Score is Determined

Insurance companies use a number of different variables to determine a customer’s insurance score. Part of the score comes from a user’s credit score. Studies show that there is a strong correlation between claim frequency and credit score. Typically, people with high credit scores tend to file less claims.

There are, of course, other things you’re rated on besides credit score. Insurance companies also take a look at whether or not you’ve filed any non-weather related claims in the past, how extensive your insurance history is, and how old it is. It’s actually very similar to how credit companies score your credit. High insurance scores typically don’t have any claims, always pay their bills on time, and have great credit.

How Insurance Score Affects Premium

An insurance score can work both ways for an insured, but how it works depends on the company. Some companies will give you a base premium and then separate their customers into tiers based on their credit score, and then they’ll give each tier a percent based bonus. This means that customers with good insurance scores are rewarded, but new homeowners or homeowners with bad insurance scores aren’t negatively impacted.

Other insurance companies will raise insurance premiums based on the insured’s credit score, so there is definitely the chance that a low insurance score negatively impacts the insured’s rate. Fortunately, it’s rare that someone has a bad enough insurance score to really be affected by rising costs in this manner. According to the American Insurance association, 87% of consumers receive either a discount based on their credit score or they aren’t affected at all by it.

The great thing about insurance scores is that they can be ran with just your date of birth and prior (or current) address. It only shows up as a soft hit on your credit report. So, if you are asked about it the next time you get a homeowners quote, don’t sweat it. Let them run the report. After all, the statistics are in your favor!

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