DEFINITION of 'Insurance Score'

A rating computed and used by insurance companies that represents the probability of a client filing an insurance claim during his or her coverage. The score is based on the client's credit rating and will impact the premiums he or she pays for the insurance coverage - a higher score will result in lower premiums, and vice versa.

BREAKING DOWN 'Insurance Score'

Individual insurance scores are based on credit ratings because historical data reveals a positive correlation between poor credit ratings and insurance claims. A perfect insurance score represents a client with the lowest risk of filing a claim. Very few people have perfect scores; however, it is possible to have a very good score.

RELATED TERMS
  1. Credit Score

    A statistically derived numeric expression of a person's creditworthiness ...
  2. Credit Scoring

    A statistical analysis performed by lenders and financial institutions ...
  3. FAKO Score

    A derogatory term for a credit score that is not one of the FICO ...
  4. Personal Lines Insurance

    Property and casualty insurance products for individuals that ...
  5. Business Credit Score

    A number indicating whether a company is a good candidate to ...
  6. Insurance Coverage Area

    The geographic region in which an insurance policy’s benefits ...
Related Articles
  1. Insurance

    What Makes Your Insurance Premium Go Up?

    You just opened your insurance renewal and found that the premium went up. Here's why it can happen.
  2. Personal Finance

    Is My Credit Score Good Enough for a Mortgage?

    Your score is critical in determining not only whether you'll secure a loan for a home, but also what interest rate you will be offered.
  3. Personal Finance

    What Do Credit Score Ranges Mean?

    Take a closer look at what credit scores in each range mean for your financial future.
  4. Personal Finance

    10 Ways Advisors Can Help Clients Improve Credit Scores

    Properly managing credit scores can help get new loans and save a lot of money in the process.
  5. Personal Finance

    Why The Credit Score You Buy Differs From The Lender Score

    It takes many people by surprise when they purchase credit scores and find the lender's credit score disclosure does not match.
  6. Personal Finance

    Is It Worth Paying To Check Your Credit Score?

    Generally, a free credit report is all you need. If you've had some credit issues, it may be worth buying your credit score to get a finer level of detail.
  7. Personal Finance

    What Is the Lowest Credit Score?

    Learn about the different types of credit scores available to borrowers, and find out about the lowest scores under each one of those credit scores.
  8. Personal Finance

    Common Things That Improve And Lower Credit Scores

    Credit scores are used by lenders to estimate credit risk. Find out how you can better earn the trust of lenders and reap the benefits.
  9. Managing Wealth

    Can You Hit The Highest Credit Score?

    Yes – it's doable. But the real question is, does it matter?
  10. Personal Finance

    Credit Scores And Your Mortgage Payment: It Matters

    Your credit score can have a huge impact on your mortgage payments. Here are some reasons why.
RELATED FAQS
  1. What's the difference between a credit rating and a credit score?

    Learn about the differences between credit ratings and credit scores, and review how these expressions of creditworthiness ... Read Answer >>
  2. What caused the European / Eurozone debt crisis?

    Understand how insurance companies price insurance premiums, and learn the importance of data and statistics in the insurance ... Read Answer >>
  3. Why is my insurance premium so high/low?

    Insurance premiums can be affected by many factors including: type and amount of risk size of deductible amount of coverage ... Read Answer >>
  4. What are the biggest factors that can affect my credit score?

    A credit score is a numeric expression that helps lenders estimate the risk of extending credit or loaning money to people. ... Read Answer >>
Hot Definitions
  1. Down Round

    A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the ...
  2. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  3. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
  4. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  5. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
  6. Tax Refund

    A tax refund is a refund on taxes paid to an individual or household when the actual tax liability is less than the amount ...
Trading Center