What is an Insurance Score?

An insurance score is a number generated by insurance companies based on your credit score and claim history to determine the probability that a policyholder will file a claim in the future.

How Does an Insurance Score Work?

There are two factors that comprise an insurance score: a person's claim history and credit score.

To research a person's claim history, insurance companies have access to the Comprehensive Loss Underwriting Exchange (CLUE) and the Automated Property Loss Underwriting System (A-PLUS), two property claim databases that manage a history of a consumer's claim filings.

For credit scores, studies have shown that people with poor credit ratings are more likely to file insurance claims. The higher your credit score, it is believed, the lower your chances of filing a claim, and thus the higher your insurance score.

A number is then generated based on these factors that is specific to the insurance industry. Insurance scores range from 200 to 997, with a good score typically being 770 or higher. A poor score is considered anything under 500.

Why Does an Insurance Score Matter?

An insurance score is a way for insurance companies to quantify their risk of loss for a particular policyholder and to help determine a premium for coverage.

Taking steps to improve your credit rating -- including paying your bills on time and eliminating bad debt -- can make a big impact on your insurance premium by lowering the risk insurers assume to provide coverage. Also, the fewer filed claims in your history will also improve your overall score.