You often hear how bankruptcy affects your credit cards and assets. However, what affects does it have on your auto insurance coverage? Bankruptcy does directly affect it since many auto insurance providers check your credit score. Below are a few insights on what to expect.
Insurance Denial May Not Be Automatic
First, it's important to note that simply having a bankruptcy on your credit report may not be enough to get a denial with an auto insurance provider. As long as you've had continuous coverage, you should be in the clear. Auto insurance providers are in this business to make money, so denying you is not in their best interest. You will, however, face higher insurance premiums.
How Bankruptcy Can Affect Your Coverage
Bankruptcy can and will affect your auto insurance premiums. Thankfully, it may not be immediate. If you are currently insured, your auto insurance provider may not run your credit check again until it's time to bill for your next renewal term. This may buy you almost another six months if the timing is right.
Many auto insurance providers are financial institutions. They handle life insurance policies, investments in money market accounts, and give out loans. This means they are always evaluating financial risk. So if you've filed for bankruptcy, they are evaluating what type of financial risk you could be placing them in.
Now, your auto insurance provider more than likely has tiered rates. So, your insurance premiums may be determined based on a credit score range. Filing bankruptcy may mean that you've had credit complications already and a low credit score. So, filing bankruptcy may not have a major impact on your insurance premium, even with a huge dive in your credit score.
How Long Bankruptcy Affects Your Coverage
Unlike other credit inquiries and debts, bankruptcy lingers on your credit report for up to ten years as opposed to seven years. So anytime you go up for renewal or change auto insurance carriers, this information will be there at their disposal. Using an auto insurance broker may be a good option for you as they can find you a carrier that is not so concerned with credit scores.
Don't Forget Your Payment Arrangements
As a final note on bankruptcy, be sure to update your payment information with your current provider. More than likely your credit cards may be closed out. If one of these is your automatic debit for your insurance, you don't' want to face a drop in your insurance coverage for non-payment.
Bankruptcy is hard to go through and not knowing the impact it will have on your insurance premiums makes it hard to plan. However, since you know it will increase your rates, it's best to put some additional money aside and prepare for the increase.
Share20 April 2015
When I got married, I knew that there were a few things that I needed to learn about the way the world worked. For starters, I had to figure out how insurance worked since I wanted to make the most of my life without worrying about money. I started focusing on the policies that I had in place and gradually moved towards acquiring new life insurance and the like. Having each of these coverages helped give both me and my spouse peace of mind. We both knew if something happened to me that the other would be okay. Check out this blog to learn more about insurance needs.