Q

What is an insurance score?

A

An insurance score is a metric that insurance companies use to determine how much of a risk you’ll be to insure. It’s calculated based on your credit score, your accident history, and your insurance history.

Anna Swartz 1600

Anna Swartz

Published January 17, 2020

KEY TAKEAWAYS

  • Insurance companies use an “insurance score” to help determine how much of a risk you’ll be to insure

  • An insurance score is calculated based on your credit score and your insurance history

  • Each company uses their own method for determining insurance scores, so it’s hard to know exactly what number they’ve assigned you

  • The better your credit history and the fewer claims you’ve filed, the better your insurance score will be

When you apply for auto insurance, insurers will calculate your rates based on a number of factors — including your age, ZIP code and the make and model of your car. Car insurance companies also look at a number called your insurance score (sometimes called an insurance credit score) which combines your credit score with your insurance, claims and accident history. Your insurance score signals to the insurance company whether you’re likely to file a claim or not.

Past at-fault accidents or claims, lapses in insurance coverage, late or missed payments, and your regular credit score all go into calculating your insurance score. An insurance score is a three digit number on a scale roughly between 200 and 999, the higher your score the less you’ll pay for insurance. Every insurer uses slightly different formulas to calculate your score, so it’s hard to say for sure which number they’re seeing when you apply for car insurance, but it’s generally possible to predict your insurance score.

In this article:

What is considered a good insurance score?

A good insurance score means lower car insurance rates, and a poor one means you’ll pay more. But what counts as a “good” score?

Just like your regular credit score, your insurance score is a three digit number that falls somewhere across a large spectrum. In the case of insurance scores, your number may fall somewhere between 200 and 999, depending on the formula your insurance company uses to calculate your score. Here’s an example of how your insurer might break down the score range:

Score RangeRating
Under 500Poor
501-625Below Average
626-775Average
776-999Good

Insurers will look at your credit score as a factor in predicting how likely you’ll be to file a claim and cost them money. A higher score signals to insurers that you’re less likely to file a claim and that you’re a safer bet for them to insure, while a lower score signals the opposite.

However not all states permit car insurance companies to use credit scores as a metric when determining your premium. California, Hawaii and Massachusetts all forbid insurance companies from using credit score to calculate insurance rates, but they can still use the other factors, like driving record, address, ZIP code and the make and model of your car.

How can I check my insurance score?

Because insurers all use their own proprietary formulas to calculate your insurance score, and they don’t disclose to applicants what their number is, it’s not a score you can check like your credit score. But checking your credit score can help give you an idea of what your insurance score might be.

Remember, you actually have more than one credit score. Your credit score is calculated based on your credit report, but there are three big credit bureaus that all generate credit reports: Equifax, TransUnion and Experian.

In addition to the three credit bureaus, there are also multiple scoring models: two common ones are FICO and VantageScore. Within those models, you’ll also see multiple versions of your score. For example, if you check your FICO credit score, you might see a FICO auto score, which your car insurance company may use when calculating your rates.

The best way to figure out your insurance score is to check your credit report. But keep in mind that your insurance score will be your credit score combined with other information, like your claims and insured history.

How is an insurance score calculated?

An insurance score is calculated based on information from your credit report and your insurance history, including claims. So your insurance score will, in part, depend on the same factors that determine your credit score, including:

  • Payment history
  • Amounts owed
  • Length of credit history
  • Credit mix
  • New credit inquiries

All of those factors also help determine your credit score. The information from your insurance history that will also go into calculating an insurance score might include:

  • Accident history, including any at-fault accidents
  • Insurance claim history

Your insurance score won’t factor in things like employment history, income or marital status. Because different insurers use different methods to calculate insurance scores and don’t make those processes public, it’s difficult to predict how exactly they’re calculating your score — they may be using information from your credit report with their own scoring model, or they may be using your existing credit scores combined with information about your insurance history.

Generally, however, if you have a good credit score and have been claim free for the past several years, you’ll have a more favorable insurance score and see lower insurance premiums.

What is a CLUE report?

We mentioned that insurance companies take your insurance history into account when calculating your insurance score — but where do they get that information? The answer is your CLUE report. CLUE is an acronym that stands for Comprehensive Loss Underwriting Exchange, which basically just means your “loss history,” or your claims history.

CLUE reports are generated by LexisNexis, and they include information about you that’s compiled from your various insurers. Even if you have home insurance with one company and auto insurance with another, claims filed with both insurers will show up on your CLUE report.

Your CLUE report contains information about claims and losses from the past seven years, including the dates you filed claims, the type of loss you reported, the claims numbers and the amount you were paid out by your insurer.

When you apply for car insurance, the insurer will request a copy of your CLUE report and likely use the information in it to calculate an insurance score for you. You may have multiple CLUE reports for both auto insurance and homeowners insurance.

You probably know how many claims you’ve filed over the past few years, but if you want to see the information that insurance companies are using, you can request one from LexisNexis. As with each of the three big credit bureaus, you’re entitled to one free CLUE report each year from LexisNexis, which you can report by contacting them online or over the phone.

If you see errors on your CLUE report, it’s important to take the time to dispute them. Mistaken claims on your CLUE report could be negatively impacting your insurance score and leading to higher premiums. You can report errors to LexisNexis, and the company will contact the insurer in question to confirm the claim.

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How can I improve my auto insurance score?

Even though you can’t see your exact insurance score with various insurance companies, you can still take steps to improve it. Because your insurance score is based on your credit score, you should take many of the same steps you’d take to improve your credit score, including:

  • Making mortgage, credit card and other loan payments on time
  • Keep balances low on your credit cards
  • Keep accounts open to build your history
  • Have a mix of different accounts, like multiple credit cards and secured loans
  • Don’t apply for new credit cards or other accounts too frequently

Your claims history also affects your insurance score. Sometimes filing a claim is unavoidable — if a tree branch falls on your car and totals it, your car insurance will pay out the value of the car — that’s what insurance is for. But try to avoid at-fault accidents by driving safely, following traffic laws and caring for your vehicle.

Insurance score for homeowners insurance

While we’ve mostly been talking about your insurance score as it relates to car insurance, homeowners insurance companies will also calculate an insurance score for you. The concept is the same — when you apply for homeowners insurance, the companies will use an insurance score to help determine your premiums, and that score will be calculated based on a combination of information from your credit report and your insurance history.

Like with car insurance, poor credit and multiple recent claims will hurt your homeowners insurance score, and having good credit and a claim-free history will help your score.