Credit Score & Homeowners Insurance

Posted on: September 16, 2015 by Javier iSure

While Florida homeowners pay the highest homeowners insurance rates in the nation, a new study has demonstrated that credit score is irrelevant to premium pricing. Although 47 states use the tactic to assign rates, this study can provide relief for some Miami Homeowners Insurance carriers.

Using credit scores to analyze risk and decipher insurance rates is not a new method. In fact, according to Quadrant Information Service’s study, 95 percent of insurance companies use credit scores to help set homeowners’ insurance rates in the 47 states where it is allowed. The only three states that have banned this practice are California, Massachusetts, and Maryland.

According to the Sun Sentinel, the Quadrant study found that in 46 states, having “fair” or “poor” credit exposes customers to significant price increases for insurance compared with homeowners who maintain “excellent” credit. What’s more, 39 states indicated a 100 percent price increase when homeowner’s credit dropped from “excellent” to “poor.”

This tactic was implemented in order to reduce claim filing risk. For example, data collected in the 1990s indicated that the higher one’s credit score was, the less likely the homeowner would be to file a claim. However, the practice is irrelevant in Florida.

InsuranceQuotes.com senior analyst Laura Adams said “I can only speculate that because Florida premiums are already highest in the country, that giving people further increases for low credit might be outside the realm of what’s possible for homeowners in the state. That doesn’t mean that Florida companies are not looking at credit, but they’re not allowing it to be a pricing factor.”

Instead, insurance pricing is more dependent on other factors such as potential catastrophic loss and distance to the coast. As such, potential hurricane and flood damage and costs to rebuild properties are significantly higher. However, state law ensures that no premium pricing, regardless of credit score, can be determined based on age, gender, income, race, color, religion, national origin, or marital status.

At iSure Brokers, we are here to guide you through obtaining the right homeowners insurance policy that best suits you. We offer comprehensive coverage to safeguard your assets, your property, and your wealth. To learn more, contact us today at (855) 381-6123.

Posted in: Blog Homeowners Insurance