Seniors & Low Credit Scores Pay More for Home Insurance
According to a recent report by Matic a leading insurtech platform, increasing homeowner insurance premium impact homeowners who have a FICO score below 580 disproportionally. In addition, senior homeowners are more likely to be overpaying for coverage.
Matic, which launched in 2017 has been collecting and analyzing data as they have been selling home, auto and other lines of insurance. Their latest report, which looks at their 2021 mid-year findings found that premiums are headed up across the country, with an average increase of 4 percent hitting most homeowners. However, homeowners with a credit score below 580 are seeing increases that hit 6.4 percent which can add up to $85 a year to their premium.
Matic released the following chart with their press release which shows the average increase for homeowners depending on their credit score, it clearly shows that homeowners with a poor credit score are paying more for coverage.
| FICO Score | Avg Premium 2019/20 | Avg Premium 2020/21 | % Change | Avg Cov A 2019/20 | Avg Cov A 2020/21 | % Change |
|---|---|---|---|---|---|---|
| <580 | $1,327 | $1,412 | 6.4% | $253,079 | $275,819 | 9.0% |
| 580-669 | $1,237 | $1,304 | 5.4% | $267,207 | $278,197 | 4.1% |
| 670-739 | $1,164 | $1,208 | 3.8% | $291,349 | $306,542 | 5.2% |
| 740-799 | $1,082 | $1,133 | 4.7% | $315,488 | $326,601 | 3.5% |
| >800 | $1,061 | $1,098 | 3.5% | $341,425 | $356,236 | 4.3% |
“In most states, an insurance score, which is partially driven by a credit rating, represents the probability of a claim being filed, and affects the premium a homeowner will pay for coverage,” said Ben Madick, co-founder and CEO of Matic Insurance in the press release. “The housing market, the cost of materials, and the cost of labor were on the rise even before COVID-19. We’re now seeing those increases reflected in the estimated replacement cost of the home (Coverage A), which ultimately drive increases in insurance premiums, among other factors. While homeowners with lower FICO scores experienced a disproportionate increase, they are receiving better coverage and the gap between premiums and Coverage A is closing.”
Another major finding of the study is that homeowners over the age of 63 were much more likely to be overpaying for homeowners insurance. According to the study, average premiums are highest for homeowners between the ages of 43 and 55 year but fail to drop proportionately for seniors.
The data indicates that seniors end up overpaying for coverage because they are not checking their policies and the annual increases over time add up. Seniors should receive a discount as they reach a certain age or retire as they are spending more time in their home. According to Matic, homeowners over the age of 63 could save an average of $751 a year simply by reviewing their policy and shopping their coverage more often.
| Age Bucket | Avg. Premium 2020/21 | Avg. Cov A 2020/21 | Avg. Savings 2020/21 |
|---|---|---|---|
| <27 | $919 | $206,747 | $329 |
| 27-34 | $1,047 | $259,399 | $389 |
| 35-42 | $1,133 | $299,368 | $454 |
| 43-55 | $1,243 | $319,186 | $625 |
| 56-62 | $1,221 | $313,433 | $573 |
| >63 | $1,183 | $298,888 | $751 |
“Many factors contribute to finding extensive savings. Home improvements and bundling auto might play a role, but the most common occurrence is from a customer that has lived in the same house for over 20 years,” said Madick in the press release. “Even without claims, a homeowner will likely experience a 3-4% increase in premiums each year. Over time, that increase is not insignificant.”
According to industry statistics, roughly 40 percent of homeowners have not reviewed or shopped their coverage in the last two years. “Matic has always been an unbiased platform and we believe insurance should be transparent for all homeowners,” said Madick in the press release. “We created RateReview™, an insurance monitoring service, to help homeowners avoid overpayment and ensure they have the right policy.”
*Methodology: Home insurance premiums and Coverage A by FICO are an average from a random sample of 45,000 policies and 3.2 million quotes analyzed from June 1, 2019 through May 31, 2020 and June 1, 2020 through May 31, 2021. Savings by age is based on the difference between current policy and new policy sold between June 1, 2020 through May 31, 2021.