How your lifestyle and neighborhood affects your insurance rates

Insurance companies use different software programs and databases to figure out how risky it will be to insure you.  If you are considered to be too high of a risk, you may have to pay more. In some cases, your application may even be denied.

Insurers use an insurance score that FICO determines from your consumer report history.  This score is partially gathered using the data from the major credit reporting companies. Your insurance score is similar to your credit score, but you can’t obtain your insurance score like you can with your credit.

There are four things an insurer will look at to determine your insurance rates:

1.       Your driving record;

2.       Your insurance score;

3.       Previous claims you have made; and

4.       The information on your application.

Lamont Boyd, director of insurance scoring solutions at FICO said, “Insurers use scoring to predict if you present a risk they can offer coverage for and at what rate.” This shows insurers feel there is a strong link between the way customers manage their credit and how likely they are to submit insurance claims. The more debt that you have, the more likely insurance companies think you are to submit a claim or even a phony one. They have found if you are using 30% or less of your available credit, then you will probably file fewer claims.

PropertyPredictR from FICO is another risk score they look at when calculating your insurance rates.  The details from your home inspection report are analyzed and then your property is given a score.  Boyd said underwriters compare things on home inspection reports. Homes with brick veneer compared to brick homes or those covered with aluminum siding will each be rated differently. Costs and approvals vary depending on these factors as well.

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