Deciphering Your Insurance Score
Many people are familiar with their credit score, and its importance in determining what kind of loans and terms financial institutions can offer. Fewer people have heard of an insurance score, and even fewer people know precisely how it’s calculated or what it means.
A person’s insurance score will greatly affect the insurance you’re able to acquire, the terms of insurance, and the direct impact on the overall budget you keep for your family. To maximize what’s possible, you must first understand your insurance score so you can understand what’s possible and what to do about it.
What Is An Insurance Score?
Much like the credit score, an insurance score is a number rating given to people to predict their risk. The calculations that determine an individual’s insurance score is the product of a complex and non-public calculation intended to boil down someone’s risk factors into one single number. The goal of doing this is to determine what a person’s premium should be on their insurance, the higher the number – the lower the premium.
What Types of Insurance Use An Insurance Score
Insurance scores are mainly for insurance on property. Auto insurance and homeowners insurance are the two most common types to use an insurance score to determine the terms of insurance acquired. However, insurance scores are sometimes used to determine premiums required for renters insurance, boat insurance, RV insurance, and motorcycle insurance.
How Is The Insurance Score Calculated
Despite the differences between an insurance score and credit score, they end up using a lot of the same factors. Studies done by insurance companies have found quite a strong correlation between credit scores and the number of insurance claims filed by an individual. However, your insurance score will also heavily factor in additional variables – namely the history of insurance claims filed in the past. These data points are considered effective at determining the risk an insurance agency takes when offering insurance.
Improving Insurance Scores
Given the importance of insurance scores in determining the price of necessary coverage, many will find it advantageous to work to improve their insurance score.
Individuals can undertake actions that are known to effectively increase credit scores. By paying all debts on time, keeping the oldest lines of credit open, decreasing overall debts, and increasing overall credit limits, a person can improve their credit score, bringing the insurance score up with it.
Filing fewer insurance claims, or even allowing time to pass with no insurance claims – the insurance score will naturally rise as a result.
Unfortunately, these tactics both take time. There’s no quick fix to improving your insurance score overnight, and insurance companies are instead looking for long term records of reliability and low risk.
Want to find out more?
Schechner Lifson Corporation is an independent insurance agency that can offer you guidance and help pick out plans. With experienced and caring agents, Schechner Lifson Corporation can make sure you get the right coverage at a price that may be more affordable than you think. Contact us today to see how we can make sense of the often overly complicated and confusing world of insurance, providing you with the best and most affordable coverage possible.