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Although most states give insurance providers the ability to use credit report details when determining factors such as monthly or annual rates, many don’t, such as California. Limitations like these don’t cause providers to bypass conducting credit checks, as the reports list other crucial factors. Below are some components homeowners insurance companies use and how those details affect you.
Understanding Risks
Reviewing one’s credit history often determines the likelihood of a claim. Providers typically consider credit history duration, debt levels, recent applications, payment behavior, and types of credit the homeowner uses. These accounts could reflect your ability to manage financial obligations.
Timely payments, adequate debt management, and financial stability are key indicators. The reports can also help some providers determine if clients are at risk for filing false claims or requests.
Determining Approval and Renewal
Preventing discrimination is one of the reasons insurance providers in states like California cannot use credit information when approving applications or renewing accounts for homeowners insurance clients. Providers aren’t permitted to refuse policy renewal regardless of one’s credit rating. Instead of using your creditworthiness, the companies focus on broader marketing conditions and the characteristics of each home.
Location is one condition used to determine policy types, as some areas are more prone to weather issues and natural disasters than others. For example, if you reside near a coastal location, your home could be at higher risk for facing wind damage and flooding. Therefore, the provider may determine your policy shouldn’t be awarded or renewed on these factors, as opposed to your credit score.
Establishing Premiums
Not all states can use credit ratings as a factor when it comes to establishing premium amounts for clients. Still, a strong credit history can cause providers to view you as someone who will file claims—specifically, expensive claims—less frequently. The steps you take to prevent potential losses and maintain your property are another factor used to establish premiums.
For states allowed to determine rates based on credit checks, the scoring generally predicts financial responsibility, leading to higher or lower premiums. However, other states focus on a property’s characteristics and other areas to determine premium amounts and regulations. This includes replacement cost expectations, the age of the property, material types used on and in the home, distance from local services such as fire departments or hydrants, neighborhood crime statistics, and the condition of the home’s roof.
Taking Past Claim History into Account
Although your credit score and standard FICO credit score aren’t always used to determine policy regulations, your past claim history is. One of the top methods providers access is the Comprehensive Loss Underwriting Exchange (CLUE). This will give an accurate and updated report of your homeowners insurance claim history.
Even if you’ve never owned a home, this report will detail other factors, such as past auto insurance Chula Vista claims filed. The history of reports filed and paid out can determine if you’re a significant risk to the provider.
For reliable, affordable homeowners insurance, San Diego homeowners know they can trust Altra Insurance Services. We also provide renters, commercial, motorcycle, and auto insurance. Request a free quote by calling one of our friendly agents today.