For a lay person, it is difficult to imagine how there could be a correlation between credit scores and home insurance premium. However, a large number of insurance companies use the credit score to arrive at an insurance score using customized software.
According to insurers, people who better manage their finances are less likely to file insurance claims. Thus, insurers give preference to customers with better credit scores and are likely to charge them lower premium for their home insurance.
Insurers will typically use credit scores in conjunction with data like construction quality of the premises, location and risk from disasters amongst others to arrive at the risk profile and the applicable premium.
Thus, there is reason to cheer for those who command a good credit score. They must ensure that they negotiate a good premium rate for their home insurance, knowing well that insurers factor this into their calculations.
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