Your Home Insurance Score Explained

credit-based insurance score

While most folks have at least heard of credit scores, insurance scores may be a mystery. Essentially, your home insurance score can impact how much you pay for your coverage, depending on where you live. Most states allow insurance carriers to factor this a credit-based insurance score into policy pricing. Let’s take a closer look at what this score is and how insurers determine it. You’ll also pick up some tips on improving your insurance score, which can help you save money on home insurance in some cases.

What Is a Home Insurance Score?

Your home insurance score is number that represents how likely you are to file a claim on your policy. Essentially, your insurance company assigns a value to certain details from your credit history, runs them through an algorithm, and calculates your score. Because the calculation includes credit information, your score is sometimes called a credit-based insurance score.

While both your credit and insurance scores are calculated using many of the same variables, they serve different purposes. Lenders use credit scores to decide if they should lend you money. A good credit score tells them you’re financially responsible individual who will most likely pay off the debt. That information is valuable to insurers, too, but they also want to figure out how much you might cost them over time. Claims cost insurance companies money, and studies have shown people with high credit scores tend to file fewer claims.

How Do Insurers Determine Home Insurance Scores?

Some providers use their own data and scoring models, while others use a number created by one of three credit bureaus or another company’s model. Regardless of the model, your credit history is a significant factor. Take at how a FICO score weighs different factors:

  • Late or missed payments are 35 percent of your score.
  • Available credit is 30 percent.
  • Depth and length of credit history is 15 percent.
  • Total number of accounts makes up 10 percent.
  • Hard inquiries are 10 percent.

But remember, credit history is just one piece of the puzzle. Insurance companies also have access to two property claim databases they can use check your or your property's claim history. Plus, an insurer might consider your home’s safety features, proximity to a fire hydrant or station, and your area’s risk for natural disasters or criminal activity.

However, credit-based insurance scores are governed by the Fair Credit Reporting Act, which means insurance providers can’t factor in:

  • Race
  • Ethnicity
  • Gender
  • Age
  • Marital status
  • Nationality
  • Religion

Insurers may not be allowed to discriminate on these counts, but they can treat certain dog breeds differently.

How to Improve Your Home Insurance Score

Home insurance scores typically fall between 200 and 997. A score of 770 or above is considered good and usually means insurers can offer better rates and discounts when they are allowed to factor in a credit-based insurance score. Anything below 500 means you have some work to do.

First, you can improve your credit score by:

  • Paying bills on time.
  • Keeping your balance low on your credit cards.
  • Reducing your overall debt.

You might even consider going to a credit counselor to get on track.

Next, be smart about insurance claims. Not every incident is worth filing a claim. Think twice before filing if your repairs are less than your deductible or you think you can do them yourself.

Finally, you may want to shop around. Different carriers sometimes offer better rates, so compare policy terms and premiums before you buy home insurance.