Insurance Scores: What They Are and Why They Matter
What is an insurance score?
An insurance score is a three-digit number that helps insurers predict the likelihood that you’ll file a claim, which can influence your coverage options and rates.
What is the difference between an insurance score and a credit score?
Insurance scores are sometimes confused with credit scores. A credit score shows lenders how likely you are to repay debt based on your credit history. Insurance scores use the same information from your credit report but are calculated differently to measure insurance risk rather than borrowing risk. For this reason, they are often referred to as credit-based insurance scores.
Why do insurance scores matter?
Insurers consider insurance scores, along with other factors, when evaluating risk and setting premiums. The use of insurance scores is regulated and may vary depending on region, insurer, and type of insurance. Generally, a higher score can help lower your rates, while a lower score may increase them. Understanding your insurance score can give you more control over your coverage and overall costs.
How are insurance scores calculated?
Insurance scores are calculated based on several factors like:
Payment history: Whether you pay your bills on time
Current debt: How much debt you currently have
Credit history length: How long you have had credit accounts
Recent credit activity: Whether you have applied for new credit recently
Credit mix: The types of credit you use, such as credit cards, loans, or a mortgage
How can you see your insurance score?
Insurance scores aren’t publicly available in the same way credit scores are. Depending on your state, you may be able to request a copy from your insurance company. If not, you can still get insight into your insurance score by reviewing your credit report. Under the Fair and Accurate Credit Transactions Act of 2003, consumers are entitled to one free credit report per year from each of the three major credit bureaus. While the exact score varies depending on the scale and formula used by each reporting agency, a credit report can provide a good indication of how an insurance score may be evaluated. You can access your free annual credit report at AnnualCreditReport.com
How can you improve your insurance score?
Improving your insurance score works much like improving your credit score, so the same good habits can benefit both. This includes paying your bills on time, keeping debt at manageable levels, and maintaining established credit accounts. Limiting new credit applications and using different types of credit responsibly can also help. Even small, consistent improvements can make a difference.
Want more from your score?
Insurance scores are just one part of the equation. Even if your score isn’t perfect, there are ways to manage costs and make the most of your coverage. Contact your local Alfa® agent to explore personalized options and find an insurance solution that works best for you.
All coverages are subject to deductibles and policy limits. This is not an insurance policy. It is intended only to provide a general description of Alfa Insurance® and/or its product lines and services. An actual policy contains the specific details of the deductibles, coverages, conditions and exclusions. Your Alfa® agent can explain the policy and benefits and answer any questions you may have before you buy.