What Is an Insurance Score?

An insurance score, also known as an insurance credit score, is a rating computed and used by insurance companies that represents the probability of an individual filing an insurance claim while under coverage. The score is based on the individual’s credit rating and will affect the premiums they pay for the coverage. Low scores reflect higher risk, so a high score will result in lower insurance premiums. Conversely, a low score will result in higher premiums.

Key Takeaways

  • An insurance score is a credit rating used by insurance companies to assess a potential insured consumer's level of risk.
  • The insurance score is one of the primary determinants in how much monthly insurance premium the consumer will be assessed.
  • Scores range between 200 and 997, with low scores reflecting higher risks.
  • What constitutes a good score varies for different types of insurance and rating companies.

Understanding Insurance Scores

An insurance score is a key component in determining the total premium that an individual pays for health, homeowners, auto, and life insurance policies. Insurance companies determine an individual’s score, in part, by using property claim databases like the Automated Property Loss Underwriting System (A-PLUS) and the Comprehensive Loss Underwriting Exchange (CLUE). 

Insurance scores range between a low of 200 and a high of 997. Insurance scores of 770 or higher are favorable, and scores of 500 or below are poor. Although rare, there are a few people who have perfect insurance scores. 

Scores are not permanent and can be affected by different factors. There are several ways for a consumer to increase their low scores (and possibly lower their premiums). To begin, a consumer will benefit by improving their credit score and paying bills on time, in addition to reducing any type of debt. A consumer may also try to limit the number of insurance claims filed over a certain period in order to boost their insurance score.

While most health, homeowners, and life insurance companies have a similar process for computing consumers' insurance scores, auto insurance companies have different standards for what they consider a good score. Some may offer lower premiums for scores in the 800-range, while others will only require scores in the 700-range to qualify for certain discounts.

Data analytic companies like FICO (formerly the Fair Isaac Corporation) and ChoicePoint have different scales for how they interpret the scores of auto insurance companies. FICO's scale ranges between 300 and 900. Scores above 700 are considered good, and anything above 800 is considered exceptional (and of little risk for the company).

ChoicePoint’s scores, on the other hand, range between 300 and 997, with good scores nearing the higher end of the scale. Consumers with ChoicePoint credit files may obtain a free report.

A low insurance score can be costly, especially for auto insurance coverage, which is legally required for car drivers in 49 of the 50 states in America. For example, if an individual’s insurance score causes their auto insurance premium to increase by $25 per month, they will pay approximately $300 more in premiums per year. In four years, the premium difference will be $1,200. Over 10 years, it will cost them $3,000, an amount that could be invested or spent in other ways.