Determining Premiums for Home and Auto Policies

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iStock_000011471283XSmallThe age old saying “things just aren’t the way they used to be” still holds true when it comes to how insurance companies price insurance these days. The way it “used to be” was that a company would look at more risk based information when it came to pricing.

For instance, on home insurance policies, the age, location, and features of the home, along with whether or not the prospective insured had suffered any claims over the past 3-5 years, were the sole determining factors when it came to pricing. After determining the rebuild cost of the home to set the amount of insurance, the price for the coverage would be consistent from person to person using this method of pricing. However, this is not so in today’s insurance marketplace.

About 15 years ago, insurance companies began looking at the client more personally, focusing on their credit score, along with other personal information to assign them an Insurance Bureau Score. This score is now used as a determining factor for the price and is more heavily weighted in the pricing system than the risk characteristics mentioned above. The result is the higher a person’s credit score the lower the premium stands to be. Statistics have shown that people with higher credit scores typically are more reliable and responsible when it comes to day to day life. Insurance statistics also show these people are less likely to suffer a loss or file a claim when it comes to non-weather related incidents. Of course no one can predict the weather. However, most all other claims are preventable.

The same holds true when it comes to auto insurance pricing. The year, make, model of the car are still used to price the limits for each coverage (liability, uninsured motorist, comprehensive, and collision). However, in addition to the Insurance Bureau Score, the pricing is by zip code and based upon a particular company’s loss experience in that zip code’s area. Of course, individual motor vehicle violations (speeding tickets, moving violations) and claims also go into the pricing.

So, if you want the best rates, take a look at your personal credit score. If its’ a good one, and you haven’t priced or shopped your insurance in a while, you more than likely stand to save some significant money. Quotes are free with no obligation and no negative impact.

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