You probably know that the premiums for your homeowners insurance may increase when and if you file some sort of claim. But, what you may not know is that your finance management skills can also affect the amount you pay for your insurance.
Basically, when deciding how much to charge you for insurance, insurers “review” your situation in a similar way to how lenders do when you apply for a loan. Essentially, the greater the financial risk you are, the more you pay. For loans, that means higher interest rates. For insurance, that means higher premiums. However, there are some strategies that can improve your credit score and also your insurance score.
But, how is my credit score possibly related to my homeowners insurance premiums?
Insurance companies have spent lots of time and money researching the best ways to charge their customers so that a hefty profit is still made. And, many studies show that a person’s credit score is actually a good indicator of how likely you are to file an insurance claim - and also how often you may file claims. Since more claims equals higher expenses for insurance companies, homeowners with low insurance scores are charged higher premiums than those with high insurance scores.
How is my insurance score calculated?
There are a few different factors that go into calculating your insurance score. Your credit report/score is a big factor. What loans and credit cards do you have? What are their balances? Do you pay on time? What is your FICO score?
Also, insurance companies review public records to determine if you have ever filed for bankruptcy or if there are liens on your property.
Moreover, insurance companies will look at your history of insurance claims and whether you have safety equipment, such as smoke detectors, installed in your home.
This data is compiled and crunched to provide a numerical insurance score. And, many insurance companies will not tell you what your score is even if you request it.
How do I raise my insurance score?
One good place to start is by increasing your credit score. Pay your bills on time, pay down balances and try to decrease the number of open credit cards that you may have.