Your insurance score helps determine the premium you pay for insurance. There are many factors involved, but your insurance score has a big impact in the amount you pay for auto or home insurance.
The first thing to realize is an insurance score is totally different than a credit score. While a credit score helps lenders determine whether you qualify for a loan, insurance companies take into consideration the following factors:
1. Payment history
2. Length of credit history
3. Account balances compared to high balances
4. Number of credit accounts
5. Credit inquiries
6. Bankruptcies, foreclosures and other collection activity
Your insurance score is calculated by taking this information into consideration. Different insures use different lengths of time. A single negative event does not necessarily mean your score will be higher than the score of others.
The score is not determined by using ethnicity or income. Also, inquiries are not always factored in, such as promotional inquiries, account review inquiries, inquiries that you get or inquiries from other insurance companies.
A score can change over time. Anytime an insurer determines your score, it is a snapshot at that particular moment. It is recommended you check your credit history annually, pay your bills on time and only open new credit accounts as needed.
For more information about insurance scores, visit the Insurance Information Institute website at www.iii.org.