How do you explain 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.
Insurance scores use an applicant's credit score and credit history to help calculate the odds that the prospective insured will file a claim under their policy. While your insurance score isn't the only factor used to determine your rates, most insurance companies use it to estimate your potential losses.
What's a good insurance score? Using the LexisNexis Risk Classifier, an insurance score of 770 or higher out of 997 is considered good and will get you a favorable premium.
People with lower insurance scores are deemed to pose a higher risk to the insurance company, and thus are charged higher rates. People with higher scores are presumably lower risk, and typically pay lower rates. Your insurance score is based heavily on your credit report.
If your scores are lower than you'd like, there are a few things you can do, or avoid doing, to help improve them. Making all of your debt payments on time, keeping your credit utilization down, and having numerous accounts in good standing can help your auto insurance scores (and your credit scores, too!).
| Score range | Rating |
|---|---|
| 776 – 977 | Good |
| 626 – 775 | Average |
| 501 – 625 | Below average |
| 200 – 500 | Poor |
To give you an idea of the ranges, LexisNexis offers credit-based insurance scores through credit bureau Experian from 200 to 997. Here is an example of scores and rankings from the LexisNexis website: Good: 776-997. Average: 626-775.
Insurance companies use your credit score as one factor in calculating your auto insurance score. However, they also consider other factors, such as your driving record and the type of car you drive. Therefore, having a good credit score does not guarantee that you will get a good auto insurance score.
You have an “80/20” plan. That means your insurance company pays for 80 percent of your costs after you've met your deductible. You pay for 20 percent. Coinsurance is different and separate from any copayment.
Similar to how creditors can use different types of credit scores, insurance companies can choose from various credit-based insurance scores. For example, FICO, TransUnion and LexisNexis all create credit-based insurance scores, and insurance companies also might develop their own scores.
Do all insurance companies use insurance score?
Most U.S. insurance companies use credit-based insurance scores along with your driving history, claims history and many other factors to establish eligibility for payment plans and to help determine insurance rates. (Again, except in California, Hawaii and Massachusetts).
Since your standard credit score heavily affects your auto insurance score, you should aim to improve your standard score. This means paying bills on time, having low credit utilization, and making other good choices. To learn about other ways to improve your credit, check out WalletHub's guide.
Insurance quotes do not affect credit scores. Even though insurance companies check your credit during the quote process, they use a type of inquiry called a soft pull that does not show up to lenders. You can get as many inquiries as you want without negative consequences to your credit score.
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.
Some insurance companies believe there is a direct statistical relationship between financial stability and losses. They believe, as a group, consumers who show more financial responsibility have fewer and less costly losses and, therefore, should pay less for their insurance.
According to a survey by Conning and Co., over 92% of all major insurers, including GEICO, use credit-based insurance scores to help determine insurance premiums in most states.
B++, B+ Good Assigned to companies that have, in our opinion, a good ability to meet their ongoing insurance obligations. B, B- Fair Assigned to companies that have, in our opinion, a fair ability to meet their ongoing insurance obliga- tions.
Your credit score is a major factor in whether you'll be approved for a car loan. Some lenders use specialized credit scores, such as a FICO Auto Score. In general, you'll need at least prime credit, meaning a credit score of 661 or up, to get a loan at a good interest rate.
The scores predict different things.
Credit-based insurance scores predict the likelihood that someone will file claims that lead to a loss for the insurance company. Credit scores predict the likelihood that someone will miss a bill payment.
Why should I opt out of LexisNexis?
By opting out of LexisNexis and Sage Stream, you regain control over your personal information. Data brokers often sell data to third parties, which can lead to unwanted marketing solicitations, potential identity theft risks, and a loss of privacy.
LexisNexis® Risk Insights Score
Risk Insights Score uses some of the data from the LexisNexis® Risk Insights dataset to create an insurance risk score. Insurers may use this at quote or renewal or when you make a claim as one of the factors to help inform their risk assessment.
Yes, AAA does use your credit score as a factor when determining your car insurance rates, as do most major insurers. However, credit checks by auto insurers do not harm your credit score and are only done in states where it is legal for your credit score to affect your rates.
- Factor #1: Make & Model of Your Car. The type of car you drive can have an impact on how much you're required to pay for coverage. ...
- Factor #2: Zip Code. ...
- Factor #3: Your Car's Age. ...
- Factor #4: Your Driving Record. ...
- Factor #5: Marital Status & New Drivers.
Here's an example of how coinsurance costs work: John's health plan has 80/20 coinsurance. This means that after John has met his deductible, his plan pays 80% of covered costs, and John pays 20%.
