What Is an Insurance Score?

While most people are familiar with credit scores, fewer are aware that there’s another scoring system in place for insurance purposes. This individual rating system called an insurance score, is designed to help insurance carriers evaluate existing and potential policyholders and determine how much of a risk each one poses.

Not all carriers use an insurance score and their use differs by carrier and state. Insurance scores are used in home, life, and even auto insurance industries and are calculated using factors like your credit score and credit history. The resulting insurance score can play a role in whether or not you’re offered coverage and how much your premium for that coverage will be; the higher your score, the less risky you are in the eyes of insurance companies. Posing less risk to carriers will impact your premium rating in a positive way. Insurance score is one of many factors an insurance company considers when determining your premium.

Here’s a look at what a homeowners insurance score is, what affects your insurance score, and how to help improve your insurance score to help snag better homeowners coverage terms.

Key takeaways

• A home insurance score is a three-digit number used by home insurance carriers to evaluate an individual's likelihood of filing a claim against their coverage.
• While there are insurance scores for other types of insurance (such as auto), home insurance scores are exclusively used by homeowners insurance carriers.
• These scores are calculated by or for insurance companies using a proprietary combination of personal and financial information.
• To calculate a home insurance score, insurance companies can include things like one’s current debt balances, previous payment history, recent credit inquiries, and age.
• Insurance carriers may use one’s home insurance score to not only evaluate an application for coverage, but also determine the cost of that policy.

Why are insurance scores important?

Home insurance scores, also known as credit-based insurance scores, are important because they help insurance carriers evaluate the likelihood you will file a claim, which can impact whether you get the coverage you want and how much you'll pay. The majority of home insurance companies use these scores when underwriting or rating potential customers or evaluating current customers for policy renewal where allowed.

Individuals are considered more risky by carriers when they have a lower insurance score, meaning they could be more likely to file a claim. For this reason, those with lower insurance scores may have more trouble purchasing the policy they want. 

Even if someone with a lower insurance score is approved for coverage, it may come at a higher price. And with the average cost of home insurance premiums rising above $1,400 (and more in many states), even a small increase in cost each year can add up to a lot over time. 

How is an insurance score calculated?

An insurance score is calculated by taking into account several personal consumer factors. Depending on location and what one’s state laws allow, these factors can include a consumer’s: 

• current credit score
• existing debt balances
• credit payment history
• number of recent credit inquiries

While some of these factors carry more weight than others, together, they provide insurance providers with a better understanding of how you’ll be as a customer and whether you’ll pose more or less risk than others. 

If you have a history of paying bills late or your credit history is limited, for example, you may face higher premiums.

Home insurance scores vs. credit scores

Though they sound somewhat similar and utilize many of the same factors in their calculations, home insurance scores and credit scores aren’t exactly the same. 

Credit scores reflect your complete financial history (at least the last seven years' worth), listing accounts like mortgages, auto loans, credit cards, personal loans, and other forms of debt. They provide financial institutions with a better understanding of how you handle your finances before lending you money, approving a credit card application, or even allowing you to open certain investment accounts.

Home insurance scores are explicitly used when applying for home insurance coverage, though they give insurance companies some similar information. Your home insurance score factors in items such as your credit-related payment history, recent inquiries, and current debt balances. A calculation is performed through a proprietary formula, with certain factors weighed more heavily than others — this varies among carriers. 

A carrier can then use this number to evaluate how likely you might be to file a homeowners insurance claim.

What is a good insurance score?

Each carrier has its own proprietary calculations for insurance scores, and companies can have different insurance score tiers and scales within their own rating systems. So, what’s considered a good score with one carrier may only be average or fair with another carrier. A good insurance score calculation may also vary based on how the insurance company is allowed to use the insured’s information in that state.

Once an insurance score is calculated, each insurance company has its own ways for implementing those score results to calculate a customer’s premiums. Depending on where you fall in your carrier’s insurance score chart, you may find yourself paying more or less in premiums for your coverage. 

Tips to improve your insurance score

Even if you don’t know your exact home insurance score, you may have an idea of where you likely stand just based on your personal credit history. If you want to boost your insurance score and potentially unlock better premiums for your coverage, here are some practices you can implement moving forward:

• Pay your bills on time, every time. Your payment history plays a role in both your credit score and your insurance score, so it can potentially impact you in many ways. Submitting your payments on time each and every month can help boost both of these scores, resulting in lower premiums, lower interest rates, and better chances of account approval.
• Limit your credit applications. Every time you submit an application for a new credit-based product — such as a loan or credit card — a hard inquiry will be noted on your credit report. This can affect not only your score but also many inquiries within a short period of time, which can be a red flag for lenders and insurance carriers alike.
• Minimize your debt. The more debt you carry around, the more of a financial risk you may pose to insurers and lenders. Paying off debt as quickly as possible can help boost your insurance score and your credit score by lowering your credit-to-debt ratio.
• Don’t close any existing accounts. Even if you don’t use a particular credit card, keeping the account open and unused can be better for your scores than closing it. That’s because that card plays into both your average age of accounts and total credit utilization. 
• Keep variety in your accounts. If you’re looking to improve your credit history — and, by extension, your insurance score — maintaining a good mix of credit-based accounts is important. This might mean carrying credit cards while also managing a home mortgage and auto loan, for example. 

As a homeowner, there are many things outside of your control, such as liability factors and natural disasters. But what is in your control can still make a huge difference in your life, and that starts with taking financially responsible steps to get your insurance score up and your premiums down. 

Whether you want to replace your existing homeowners insurance policy, need to add personal liability coverage, or are just shopping around to see what sort of premiums you’d be eligible for, improving your insurance score is an important step toward helping to lower rates. 

How to find your home insurance score

If you’re wondering how to check insurance scores for yourself, you can call and ask your homeowners insurance carrier what your insurance score is. Just know that they may not be willing to share this information.

Still have questions?

Want to know even more about home insurance scores and how they affect your ability to buy homeowners insurance coverage? Here are a few frequently asked questions to consider.

Do all states use an insurance score?

No, not all states allow insurance carriers to use credit-based insurance scores when evaluating applicants for coverage or determining premiums. Currently, eight states restrict or even prohibit the use of insurance scores when calculating rates; these include California, Hawaii, Maryland, Massachusetts, Michigan, Nevada, Oregon, and Utah.

What will make my insurance score decrease?

There are many factors that go into an insurance score. You may cause your own score to drop if you fail to make payments on time, max out your credit cards, apply for too much new credit, or rack up a lot of debt. 

Can insurance score affect your credit score?

No, insurance scores cannot affect credit scores. Insurance scores are exclusively used to help carriers evaluate consumers in determining coverage options or in calculating premiums. While credit scores (and related factors) can influence one’s insurance score, the reverse is not true. 

Does an insurance score affect all policy types?

Insurance scores are generally used when buying or renewing homeowners or auto insurance coverage. Each insurance company has its own proprietary score calculations and rules regarding how these insurance scores will affect each type of policy. You should ask your insurance agent when applying for a new policy whether the carrier will use an insurance score.