What's an Insurance Score?
An insurance score is similar to a credit score, but insurance scores use information in your credit file to help determine how likely you are to file an insurance claim. Different insurance companies calculate insurance scores differently, but with most insurers your insurance score is a significant factor in determining your rate -- sometimes just as important as your driving record.
Why Do Insurers Care About My Credit History?
Studies have shown a direct correlation between a person's credit and the likelihood of him or her filing a claim. Individuals with poor credit history are generally more likely to file car insurance claims, so they will often pay above-average car insurance rates. Similarly, people with excellent credit histories are generally less likely to file car insurance claims and will often be rewarded with lower-than-average rates.
In fact, according to the Insurance Information Institute, the average cost of a claim for a person with below-average credit is $918 -- 53% higher than the average claim. Likewise, the cost of an average claim from a person with an above-average credit score is $558 -- 23% below the average claim.
Is This Fair?
Many people don't like the fact that their credit scores are being used as an underwriting factor for their car insurance rates, but for most drivers this fact isn't going to change anytime soon. Three states -- California, Massachusetts and Hawaii -- currently forbid insurers from using credit data when determining car insurance rates. But every other state allows it to some degree.
How Can I Keep My Rates as Low as Possible?
The best thing to do is to take excellent care of your credit. But if your credit score is already low, there's likely not much you can do about it in the short term.
The next best thing to do is to shop around for car insurance quotes from multiple providers. All carriers use insurance scores in different ways, so you may be able to get a better deal at a different provider, especially if your driving record is good.
Compare Car Insurance Quotes Online
An easy way to compare car insurance quotes online is to visit InsWeb.com. By filling out one simple form you'll receive multiple quotes from leading national insurance providers. It's an easy way to shop around and see if you're paying more than you have to.