What A Car Insurance Score Is And How It Can Affect Your Ability To Obtain Coverage

Did you know automobile insurance companies consider much more than your age and driving record when assessing your risk as a policy holder? They also look at your financial credit history, which can directly affect something known as your car insurance score.

Consider the cautionary tale of Frank, a 36 year-old software engineer. Frank got his driver’s license at 16 and drove responsibly for the next ten years. Frank paid his premiums on time every month, and never had an accident — not even a fender-bender. At 26, Frank moved to a city where he could take public transportation. Frank sold his car, and didn’t drive for the next ten years. Then, at age 36, Frank got a job in a town where he would have to drive again. Frank renewed his license and re-applied for coverage with his old insurance company. Then he got the shocking news: His old auto insurance refused to offer him car insurance coverage.

The problem wasn’t Frank’s driving record, which was impeccable. The problem was Frank’s insurance score, which was linked directly to his poor financial credit score. You see, unfortunately for Frank, a two year period of unemployment – followed by a costly divorce — left him in some serious credit card debt. Frank defaulted on several cards, and his credit score plummeted to below 400. Eventually, Frank got back on his feet, and paid down his debts. However, the damage to Frank’s insurance score had already been done.

Credit scoring, in general, stems from the theory that financial stability and risk are directly related. Therefore, if you have a low car insurance score, an auto insurer will probably consider you more likely to file or inflate claims, commit fraud, or have an accident. Of course, an auto insurer will consider other factors when assessing your risk as a driver – for example, motor vehicle records, loss reports, and accident history. However, your financial credit score also plays a major role in determining how much you will pay for car insurance, or whether you will be insured at all. Car insurance companies can refuse to cover you – or can non-renew your existing coverage – even if you never filed a claim, had an accident, and always paid your premiums on time. Just ask Frank.

Insurance scores, like credit scores, are shrouded in mystery. Unless you work for an insurance company, there’s no way to know exactly how they calculate scores. But one thing is for sure: If your credit score stinks, your insurance score probably stinks, too. The best way to obtain car insurance coverage, and keep your premiums down, is not only to buckle up, but also use credit responsibly.

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