How We Saved 44% on Our Homeowners Insurance

I received the premium notice for our homeowners insurance the other day. It came with an insert that detailed what they called their "premier discount" program. The insert said the following:

The Premier discount is based upon information obtained from a consumer report which provides a score of certain credit characteristics. These insurance scores have proven to be predictive of future loss experience and are used to determine the level of discount that is applied to the policy.

A few more things I found interesting in the notice:

Insurance scores are requested for all driving age household members and are routinely updated every three years. However, at your request, we will update your score up to once a year.

The highest Actual Insurance Rating Score in the household is used to establish qualification for the Premier Discount.

The notice ended with the address for ChoicePoint (where the rating comes from) and says I have the right to see my report if I want to.

The insert listed the Insurance score and discounts as follows:

739 and higher - 44% discount
723-738 - 42% discount
690-722 - 38% discount
651-689 - 34% discount
625-650 - 30% discount
587-624 - 25% discount
531-586 - 19% discount
461-530 - 10% discount
460 and lower - 0% discount

While it was ovbious to me that our credit score played a major role in our insurance score, I wasn't sure exactly how the insurance score was calculated. So I looked around and found this interesting piece all about insurance scores. In short, the insurance score looks at many of the same factors that a credit score considers.

Since we have a great credit score, we also had a good insurance score (750). Thus we received the highest discount possible (44%). Just another example of how taking care of your credit score and managing your debt can save you a good amount of money.

Comments

[Sarah]

My husband and I have exceptional credit scores, however, I think using your credit score for insurance discounts is bogus. We are actively trying to pay off all debt and will NOT be using any debt in the future (except for a possible mortage). Once all of our debt is eliminated, our credit score will drop drastically. How is it fair that because we were prudent with our finances that we get penalized on the cost of insurance? I think the use of a FICO score for insurance costs is ridiculous....

[Brian D]

Well, that's cool. My homeowner's insurance just came up for renewal, and in spite of our excellent credit score (both my wife and my score is over your 739 threshold), the rate was going up. I shopped around a little bit and dropped my premium by about 50%.

[Mr. ToughMoneyLove]

Actually I don't find anything to be happy about with this news. It is another example of how we have allowed credit scoring to take over all aspects of our personal financial life. It won't be long before insurance companies convince Fair Isaac, Experian and others to include your insurance claims history as part of your overall "credit score." Why? To further intimidate policy owners against making claims. Eventually they will just change the name of the score to "consumer rating score." Sadly, we follow along like sheep and let it happen.

Perhaps one good thing that might flow from the current financial crisis is that people will re-focus on true metrics of financial stability, such as net worth and positive cash flow.

[FMF]

Sarah --

We've had no debt (not even a mortgage) other than credit cards (which we pay off every month) and have a great credit score.

[PRW]

I have not had a mortgage on my home since 1986 and no other loan (auto) outstanding since 1988. I have used credit cards but have always paid the full balance monthly----and have always qualified for the "Premier Discount" described above....So I don't see not having debt as an issue.

[LC]

I also don't see having no debt as being an issue. I don't have a mortgage or any credit cards or car loans, etc. and my score is 801.

My question is, can we find out our score and get a discount without our insurance company notifying us of it first?

[Glen]

Mind if I ask which insurance company this was with? For 44%, I'd seriously consider switching!

[FMF]

Glen --

AAA.

[prw]

AAA of Michigan for me.

[dcs]

Enjoy it while you can. If the State Supreme Court upholds the appellate court ruling, insurance discounts based on credit will be illegal in this state. Not sure how I feel about that. On the one hand, it does seem unfair. On the other, well, I get the discount.

[Mike B.]

I don't know the exact details, but I was trying to get a price quote from Progressive.com and found their quote to be about what I was paying with Farmer's insurance. But, I hadn't entered my SS# for security reasons. Later, I decided to try it wit my SS# and found the new quote was nearly half. I can only assume it was due to my credit rating. Now, I'm looking for a new home owner's insurance since Farmers jacked that up after I left them for car :(

[Mark]

Don't forget to check with Erie Insurance for car and home. They have annual premiums for car insurance, instead of semi-annual.