Understanding your insurance “score”

Written by the Square One team

Reviewed by Rena Novotny

Updated June 18, 2024 | Published November 11, 2013

If you’re like many of us, you tend to shop around for home insurance. Some important factors are price, claims handling, reliability, ability to contact a representative when you need to, and ease of obtaining a quote or policy online, in person, or by phone.

All of these factors, and more, can help you determine whether this is the type of company you want to trust with insuring your valuable possessions.

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The important points

  • Insurance pricing is calculated based on many individual factors, which come together to create a form of insurance score.
  • Higher levels of risk associated with an object of insurance lead to higher premiums to insure it.

What is an insurance score?

Have you ever thought about how insurance providers decide what premium to charge? Every time a home insurance provider issues a new policy, they are taking a calculated risk – they need to collect enough premiums to pay the claims that will occur during the year. Many factors are considered in order to determine your premium – like the age and condition of the home – in addition to certain factors that are related to the person who owns or rents the home. Taken together, these factors form part of the insurance score that will help determine the premiums you pay.

Do you currently have insurance?

Statistically, past behaviour is a strong predictor of future behaviour. If you currently have home insurance, and a proven history of keeping up that insurance without frequent claims, then your new home insurance provider knows that you are less likely to make claims in the future – potentially reducing the premium they will charge. Proven claims-free history also helps demonstrate that you are a responsible homeowner or renter, who takes care to avoid damage to property, and who maintains your belongings.

If you don’t currently have home insurance, don’t worry – it isn’t a prerequisite to buying a home insurance policy. Everyone is a first-time insurance buyer at some point! In most cases, not having prior insurance will only have an impact on your premium, and in some cases, on the deductibles or limits of coverage that you will be eligible to purchase on your first policy.

Have you been denied coverage by another carrier?

If your existing home insurance provider is refusing to continue to insure you, your new home insurance provider will have a few additional questions. There are many ordinary reasons why you might be in this position. Perhaps you’ve bought a new home in an area in which your existing company doesn’t do business. Or, they may have chosen to stop insuring certain types of homes. In cases like these, you should have no problem finding a new home insurance provider.

In other cases, home insurance providers might not be able to continuing to insure you because you’ve made a number of claims in a short period of time. Or, perhaps you’ve started using your home for purposes that they aren’t comfortable insuring – like short-term rentals, or for business. In cases like these, your new home insurance provider will need to know the specifics in order to determine whether their underwriting guidelines will allow them to offer you a policy.

Have you been cancelled by an insurer for non-payment?

If an insurance provider has previously cancelled you for non-payment of premium, then your new home insurance provider may have additional questions. Again, there are ordinary circumstances that could place you in this position, like identity theft or a compromised credit card. However, if you have been cancelled for non-payment because you are regularly late in paying bills, then some home insurance providers will be unwilling to insure you. Or, they may require you to pay in full, rather than on a monthly payment plan.

One common misconception is that, if you don’t want an insurance policy anymore, then you can just stop paying the premium and let it be cancelled. Don’t do this! As noted above, cancellations for non-payment can make it more difficult to find insurance in the future, or to get monthly payment options. If you don’t need your policy anymore, just let your insurance provider know – you have the right to cancel your policy at any time, upon request.

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Have you had prior claims?

As noted at the beginning of this article, past behaviour is a strong predictor of future behaviour. For this reason, your past claims experience is one of the details that home insurance providers will consider. Statistically, a customer who has made claims in the past is more likely to make claims in the future – and so, it makes sense to charge a higher premium, to make sure that enough money is collected to pay the future claims.

If you’re shopping around to find a less expensive policy, be honest about your prior claims. Most insurance companies use the Home Insurance Tracking System (HITS) to look for any previous claims made by you. HITS also captures any losses that you initially reported, but then decided not to claim. If your home insurance provider asks you about previous claims, and you fail to respond truthfully, your policy can be cancelled and your claims can be denied. This would be an unpleasant outcome, and it’s one you can avoid by answering application questions honestly. That way, your new home insurance provider can calculate the correct premium, and you can be assured that your new policy will be there for you in the event of a claim.

Have there been prior claims at your home?

Sometimes, a home’s history of prior claims can indicate that the home itself is at higher risk for certain types of damage. For example, if an aging sewer system causes frequent water backup claims, then it stands to reason that a higher premium will need to be charged in order to pay the claims that are likely to occur in the future.

Do you have a strong credit score?

Many insurance companies now run a soft credit check on customers. This is because, statistically, individuals with stronger credit profiles are also less likely to make frequent home insurance claims. This means that a home insurance provider can charge a lower premium, because fewer or smaller claims are likely to occur in the future.

At Square One, we run a “soft” credit check, which has no impact on your credit score.

Want to learn more? Visit our Home Insurance Basics resource centre for dozens of helpful articles to guide you through the ins and outs of home insurance. Or, get an online quote in under 5 minutes and find out how affordable personalized home insurance can be.

About the expert: Rena Novotny

Rena's 23-year career started as an independent adjuster where she specialized in complex property, liability and special risk loss. As a branch manager, Rena hired, trained, mentored and coached several adjusters. She continues part-time post-graduate studies in neuro-psychology and traumatization, learning how both may impact the insured's engagement on catastrophic claims. Rena has a MA (Conflict Analysis and Management), CRM, CIP, and holds a level 3 adjusting license.

About the expert: Stefan Tirschler

Stefan is responsible for underwriting leadership, market expansion, and product research and development for Square One's operations. Stefan has earned his Fellow Chartered Insurance Professional designation, and maintains a level 2 general insurance license in British Columbia, Alberta, Saskatchewan, Manitoba and Ontario. Stefan is also an Education Committee member and CIP/GIE instructor for the Insurance Institute of Canada.


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