The term “credit score” is quite familiar to most South Africans. A good credit rating can ensure that you receive approval for loans and other forms of credit. A bad credit score can prevent you from getting credit, employment or even renting a home.
An insurance score works much the same way and is used to decide whether or not to provide you with insurance cover, the amount of cover that you receive and the premium that you pay. Your insurance score is calculated using different risk factors and may depend on the type of insurance that you are applying for.
Whether you are a business owner or an individual, you need to be aware of how your insurance score is calculated and how these factors will affect different aspects of your insurance. Commonly, risk factors that will decide your insurance score include:
1. Insurance History
If you have had the same insurance policy with the same insurance provider for a number of years, this will have a positive effect on your insurance score. If you haven’t, proving that you have had unbroken coverage from different insurers over the years may also be beneficial. If you are taking out an insurance policy for the first time, then you have no history to check on and it could mean that you pay more for your insurance.
2. Claims History
Your insurance company does not want you to claim from them unless it is entirely necessary. In order to deter you from claiming, they will increase your insurance premium every time you claim. Every claim will also negatively impact your insurance score. Changing insurers is not going to prevent this from happening.
Insurance companies will check your claims history with other insurers before providing you with cover. If they find that you have claimed often in the past, they are going to increase your insurance premium and deduct points from your credit score. It is advisable not to claim from your insurance unless your really need to.
3. Personal Factors
Your age, gender, income, employment history and other personal factors can also influence your insurance score. It will affect your score differently depending on the type of insurance that you are applying for. For example, a younger person will pay more for car insurance because they have less experience driving and are demographically more likely to be in an accident. However, they are likely to pay less for life insurance because the risk of contracting a dread disease or dying is lower than for the elderly.
4. Credit Score
Most insurance companies are going to run a credit history check before approving an insurance application. Your credit score is used to predict how likely you are to pay your premiums on time. If you have a bad credit score, it will affect your insurance score negatively. If you have a good credit score, it will have a positive impact on your insurance score.
The better your insurance score, the more likely you are to get insurance and the lower your premium will be. It is recommended to talk to Custom Insurance to find out what your insurance score is and how you can improve it to pay less for your insurance in the future.
