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. Combined Ratio

    A measure of profitability used by an insurance company to indicate ...
  2. Credit Rating

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

    An insurance policy issued to someone who does not qualify for ...
  4. Adverse Action

    An action that denies an individual or business credit, employment, ...
  5. Credit Card

    A card issued by a financial company giving the holder an option ...
  6. Insurance

    A contract (policy) in which an individual or entity receives ...
RELATED FAQS
  1. How is my credit score calculated?

    The credit score, commonly referred to as a FICO score, is a proprietary tool created by the Fair Isaac Corporation. This ... Read Full Answer >>
  2. What financial ratios are most useful for an investor to evaluate the liquidity of ...

    An insurance company, like any other nonfinancial company, needs access to liquidity in case it needs to fulfill its debt ... Read Full Answer >>
  3. What economic indicators are important to monitor when investing in the insurance ...

    Inflation and interest rates are the best economic indicators to monitor when investing in the insurance sector. Unlike with ... Read Full Answer >>
  4. Why do some companies in the insurance sector engage in reinsurance?

    Some companies in the insurance sector engage in reinsurance because they want to reduce risk. Reinsurance is basically insurance ... Read Full Answer >>
  5. Why is the insurance sector considered a low-risk investment?

    Historically, the insurance sector has enjoyed modest returns and perceived safety. It's been a favorite for investors who ... Read Full Answer >>
  6. What price-to-book ratio is considered average in the chemicals sector?

    You can use Microsoft Excel to calculate the loan-to-value ratio if you have the mortgage amount and appraised value of a ... Read Full Answer >>
Related Articles
  1. Home & Auto

    How An Insurance Company Determines Your Premiums

    Find out how insurers use credit history to build an insurance score and how it could affect your bottom line.
  2. Budgeting

    12 Car Insurance Cost-Cutters

    If car costs are dragging you down, find out how to free yourself from some of the extra weight.
  3. Credit & Loans

    What's On A Consumer Credit Report?

    A look at the various components and considerations that go into one's credit report and credit score.
  4. Credit & Loans

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  5. Options & Futures

    Choosing The Best Disability Insurance

    Social Security benefits can be hard to collect. Find out why you need disability insurance to protect your income, and learn how to choose the right policy for you.
  6. Options & Futures

    For Top-Notch Insurance Coverage, Compare Quotes

    Find out how to use and compare policy options to get the best coverage at the best price.
  7. Retirement

    What To Do If Your Insurance Won't Pay

    Before paying for coverage, find out what you need to do to ensure you get paid.
  8. Professionals

    An Advisor's Guide to Prof. Liability Insurance

    A guide to what financial advisors need to know about professional liability insurance.
  9. Insurance

    India's Two-Child Policy

    As of 2014, 11 Indian states have passed laws to restrict Indian citizens from having no more than two children.
  10. Economics

    What Does Asymmetric Information Mean?

    Asymmetric information describes a situation where one party in a transaction knows more than the other.

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  3. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center