Insurance Score

AAA

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.

INVESTOPEDIA EXPLAINS '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 Rating

    An assessment of the credit worthiness of a borrower in general ...
  2. Substandard Insurance

    An insurance policy issued to someone who does not qualify for ...
  3. Credit Card

    A card issued by a financial company giving the holder an option ...
  4. Credit Report

    A detailed report of an individual's credit history prepared ...
  5. Credit Bureau

    An agency that researches and collects individual credit information ...
  6. FICO Score

    A type of credit score that makes up a substantial portion of ...
Related Articles
  1. How An Insurance Company Determines ...
    Home & Auto

    How An Insurance Company Determines ...

  2. 12 Car Insurance Cost-Cutters
    Budgeting

    12 Car Insurance Cost-Cutters

  3. What's On A Consumer Credit Report? ...
    Credit & Loans

    What's On A Consumer Credit Report? ...

  4. The Importance Of Your Credit Rating
    Credit & Loans

    The Importance Of Your Credit Rating

comments powered by Disqus
Hot Definitions
  1. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  4. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  5. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  6. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
Trading Center