Insurance Scores, Explained

Your insurance score is a bit different than your credit score. We'll help you understand the difference, and why it matters.

Team LemonadeTeam Lemonade

You’ve probably heard the term insurance score before—especially  if you’ve recently gotten your car or home insured. 

But let’s be honest, most of us don’t work in underwriting and can’t really explain what this score is, let alone how it’s used. 

And if you’ve turned to Google for help, you’ve probably encountered a lot of complex (and partially contradictory) definitions. To complicate matters, a lot of people—including some insurance companies!—use the terms “insurance score” and “credit score” interchangeably, even though there are important distinctions. 

That’s where we come in. We’ll clear up any ambiguities—and we promise to keep it simple.

Here’s a short summary of what we’ll be covering:

What’s an insurance score?

In a nutshell: Your insurance score, also called an insurance credit score or credit-based insurance score (CBIS), gives your insurance company a way to estimate how likely you are to file an insurance claim. 

In other words, it attempts to predict how risky you would be to insure—and to then adjust your policy price accordingly. Different states have different rules and regulations regarding how an insurance score can be used for rating and underwriting, if at all. 

An insurance score is used in the context of your homeowners or car insurance policy and takes an array of financial metrics into account, such as:

  • Any outstanding debt you currently have
  • Your general payment history
  • The length of your credit history 
  • Applications for new credit cards, loans, or mortgages
  • Number and types of credit accounts

If you’re thinking this doesn’t sound so different from your credit score, you’re not too wrong. We’ll take a look at the differences and similarities in just a sec.

But first, back to the basics: Why would your insurer want to anticipate the likelihood of you submitting insurance claims? Well, paying out claims can get expensive for your insurer—it’s in their interest to keep this risk low. Your insurance score can give them a taste of what it would be like to insure you.

That said, a lot of factors go into an insurance company’s decision-making process—and a low insurance score, on its own, wouldn’t be the reason you could potentially be denied coverage.

Insurance score definition
I’m telling you… your insurance score and your credit score aren’t the exact same thing!

How do I know if I have a good insurance score?

What’s considered a good insurance score? Generally speaking, scores range from 200 to (an oddly specific) 997—the higher the score, the better. 

As a rule of thumb, a score below 500 is considered quite poor, whereas any score above 770 is considered good. 

However, the exact scoring might differ depending on which provider is doing the calculation. This means that your scores for your car and homeowners insurance could look slightly different from each other—especially if your insurer is using different models for auto insurance and home insurance, for instance.

How does my insurance score affect what I pay for insurance?

A low insurance score means your insurer is taking a higher risk by insuring you, which means you will likely be charged a higher premium. In contrast, if your score happens to be high, you present a lower insurance risk to your insurer which, in turn, will be rewarded with a lower premium.

Note that your insurance score is only one factor that goes into calculating how much you have to pay for your insurance. Your claim history also comes into play—as in, how many previous insurance claims you’ve filed in the past—as does the type of insurance you’re applying for, and other factors like the age of your home or your car, your driving record, or your proximity to a fire station. 

Insurance vs. credit score
Look who’s never filed a claim and as a result has significantly lowered their insurance premium. Mic drop!

Why does an insurer even care about things like your credit history?

According to the data analytics company FICO, poor financial behavior (reflected in a bad credit score) and the likelihood to hand in more or expensive claims go hand in hand. 

FICO is basically saying that people who are conscientious about their finances, and thus likely have a more favorable credit score, also tend to file fewer insurance claims. 

How do they explain this? In short, they surmise that individuals with sensible financial behavior tend to take better care of their stuff (avoiding damages which can lead to filing claims in the first place).

What’s the difference between your insurance score and your credit score?

At first glance, credit and insurance scores don’t appear to be all that different. 

As we’ve hinted to above: Your insurance score is calculated by taking a lot of the data that can also be found on your credit report into account. The same technique is used to determine your credit score. So why bother having two types of similar scores? 

So we’ve established that both your credit score and your insurance score share a common denominator. But your insurance score is slightly different than your credit score. Here’s how: 

  • The exact factors that go into calculating your insurance or credit score rating are usually weighted slightly differently. To simplify: Your insurance score might, for instance, put a stronger emphasis on your payment history, whereas your credit score might emphasize a different factor pulled from your current credit report.
  • Your insurance score uses credit metrics to calculate the likelihood of you filing an insurance claim, whereas your credit score calculates your likelihood of paying back a loan

As they are similar but not completely overlapping, it is technically possible for you to have a high credit score and a lower insurance score—or vice versa. 

Lemonade definition insurance score
I just managed to pull off a joke about insurance scores #hero #gotmygoalsright.

Now let’s take a deeper dive into what you can do to change your individual insurance score.

Which factors can really lower or mess up your insurance score?

You’ve probably already guessed it: As your insurance score and credit score are calculated similarly, the same things that would hurt your credit score would likely lead to you getting a lower insurance score, such as late payments and a high number of credit applications.

So how could you go about improving a lackluster insurance score? Again, you’d apply the same techniques you would use to raise a poor credit score. If you have sufficient finances in place to pay back any loan or outstanding debt you currently have, don’t hesitate to do so. The same applies to paying bills on time.


Please note: Lemonade articles and other editorial content are meant for educational purposes only, and should not be relied upon instead of professional legal, insurance or financial advice. The content of these educational articles does not alter the terms, conditions, exclusions, or limitations of policies issued by Lemonade, which differ according to your state of residence. While we regularly review previously published content to ensure it is accurate and up-to-date, there may be instances in which legal conditions or policy details have changed since publication. Any hypothetical examples used in Lemonade editorial content are purely expositional. Hypothetical examples do not alter or bind Lemonade to any application of your insurance policy to the particular facts and circumstances of any actual claim.