What Is A Home Insurance Score, And How Does It Affect Your Premiums?

While knowing your credit score is important as you consider buying a home, understanding your home insurance score is equally so. Why? Your home insurance score will play a huge role in determining how much you pay in premiums.

Read on to find out what a home insurance score is, how it differs from a credit score, and why it will affect the amount you pay for your home insurance policy.

Home Insurance Scores Vs Credit Scores

A home insurance score is a rating insurance companies use to estimate the probability you'll file a homeowner's insurance claim resulting in a loss for the insurance company. On the other hand, credit scores are based on the likelihood you'll be able to repay what you have borrowed.

The two scores may not serve the same function, but they are closely interlinked. You will find many of the factors included in your credit history will be used in calculating your home insurance score and vice versa. Research has proven a person's financial history correlates with the likelihood they will file an insurance claim.

The Factors Making Up A Home Insurance Score

It's important to know every insurer has its own method for assigning a home insurance score, which is why yours will vary depending on the carrier. Calculating a

home insurance score can be complex, which makes it difficult to find out exactly what factor could lower or increase your home insurance score.

The following list includes factors commonly influencing your home insurance score:

  • Hard Inquiries: Hard inquiries occur when a financial institution like a credit card issuer or lender, checks your credit as they make a lending decision.
  • The Age of Your Oldest Account: The age of your oldest account is the first credit account you opened still existing on your credit report.
  • Credit Card Utilization: Your utilization is the current total amount of debt on your credit cards divided by your total credit card limits. Typically, the higher your utilization, the greater the insurance risk you pose.
  • Amount Past Due: If you pay your credit cards on time, you will not have a past due amount. Having a past due amount could represent a greater insurance risk, particularly if your total past due amount is high.
  • Credit Account Standing: Your credit reports indicate whether your credit accounts are in good standing. If your accounts are paid on time with at least the minimum amount paid, this could have a positive impact on your homeowner's insurance score. However, if your accounts have led to collection, repossession, or foreclosure, your home insurance score may suffer.
  • Derogatory Marks: Derogatory marks include a wide variety of negative information on your credit reports. You don't want to see these on your credit report because they may signal you as a higher risk.
  • Total Credit Card Limits: This is the total dollar amount of all your credit card limits combined. A higher total credit limit may work in your favor. They could indicate a lower insurance risk.

Your Home and Neighborhood: The home and neighborhood you are considering could also impact your score. This may include how close your home is to a fire hydrant or station, whether you have an alarm system, the claims history in your neighborhood, and whether you're living in an area that is prone to natural disasters.

How Home Insurance Scores Affect Your Premiums

Like your credit score, the higher your insurance score is, the lower the risk you pose to your insurer. This means a lower risk and a higher insurance score will usually result in lower premiums.

Where You Can Find Your Home Insurance Score

You can find your home insurance score by contacting a third-party provider of insurance scores or your current insurance company. If you're looking for new homeowners insurance in Florida, we can help you find your home insurance score and a policy to fit your needs. Call us at (866) 568-8922 to get a free quote.

Other blog posts like this

Discover the essentials of condo insurance in Florida – and ensure your dream life in the Sunshine State is fully protected.
Edison Insurance Company
April 1, 2024
Learn about flood risks and insurance requirements in Florida -- and the financial wisdom of securing your property against the unpredictability of nature.
Edison Insurance Company
March 1, 2024
Insurance fraud impacts everyone: Florida homeowners, insurance companies, and the state. You can help curb rising premiums by reporting suspected fraud.
Edison Insurance Company
March 1, 2024