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What Goes Into Your Home Insurance Score?

Blog Post07/19/2016
Home Buying
What Goes Into Your Home Insurance Score?

Becoming a homeowner marks a thrilling new chapter in your life, but this exciting change also brings a great deal of financial responsibility. Homeowners insurance is just one of the many costs that accompany buying a new house. Should damage occur to your property or possessions, or if anyone is injured in your home or on your property, a homeowner’s insurance policy covers your liability. The cost of homeowner’s insurance depends a great deal on your homeowner’s insurance score.

What Is a Home Insurance Score?

A home insurance score is a numerical value or rating that insurance companies use to determine risk. Home insurance scores are often mistaken for credit scores. Although the factors used in the insurance point system are similar to those that make up your credit scores, the two types of scores are used for very different reasons and shouldn’t be confused.

A creditor uses your credit reports to help determine the probability that a line of credit will be repaid, such as a credit card or a mortgage. Insurers use your credit information to help determine the likelihood that you’ll file a claim during the term of your policy.

How Are Home Insurance Scores Used?

Insurers want to predict how likely you are to file an insurance claim that will result in losses, so your home insurance score is primarily used to help determine the amount of your premiums. Similar to credit, the higher your insurance score, the lower the risk — meaning you’re less likely to file a homeowners claim. Low risk usually results in lower premiums. A lower home insurance score can indicate a greater chance that a claim will be filed, which will likely mean higher premiums.

Components of a Good Home Insurance Score

Your home insurance score is a variable of your overall credit health, so the factors that go into a positive credit score also help provide a good insurance score. The variables from your credit history that are calculated into your home insurance score include payment history, the age of your oldest account (the longer the account has been open, the better) and the types of credit you have, such as credit cards, a mortgage and installment loans.

Other variables include the percentage of credit you’ve used, the overall amount of debt you’re carrying, hard credit inquiries and any derogatory remarks on your credit reports, such as bankruptcy, foreclosure and debt collections. Insurers also consider factors that are not found in your credit history and therefore are not reflected in your home insurance score, like the location of your property.

The closer your home is to a fire hydrant or fire station, the better. Living in a low-crime neighborhood and having an alarm system can work to your advantage and may result in lower premiums. Being located in an area that isn’t prone to natural disasters, such as floods or earthquakes, is also a benefit for lower premiums.

On the other hand, you may have higher premiums if you live in an older house, as it may be more likely to sustain damage in a covered instance like a flood. Having previously filed homeowner claims can also lead to higher premiums than those with no prior claim history. All these financial and residual factors are put through an algorithm to determine your single score.

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Finding Your Score

Knowing your home insurance score can help prepare you when buying a new home or renewing a current home insurance policy. A third-party provider of insurance scores may also be able to calculate it for you. Each insurer may use its own data and scoring model for calculations, so comparing quotes from various insurance companies can be beneficial in obtaining the best rates.

Disclaimer: The information posted to this blog was accurate at the time it was initially published. We do not guarantee the accuracy or completeness of the information provided. The information contained in the TransUnion blog is provided for educational purposes only and does not constitute legal or financial advice. You should consult your own attorney or financial adviser regarding your particular situation. For complete details of any product mentioned, visit This site is governed by the TransUnion Interactive privacy policy located here.

What You Need to Know:

There are various types of credit scores, and lenders use a variety of different types of credit scores to make lending decisions. The credit score you receive is based on the VantageScore 3.0 model and may not be the credit score model used by your lender.

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