Many factors determine your insurance eligibility, including your financial history. Bankruptcies are seen as a risk by insurance companies because they suggest that you might not be able to pay your premiums. In bankruptcy, your credit score will be lowered significantly, resulting in a higher insurance rate until your credit improves.
What Is Bankruptcy?
Bankruptcy refers to a legal process involving a person or business unable to repay its outstanding debts. The debtor usually files a bankruptcy petition; however, the petition can also be filed on behalf of the creditors. All of the debtor’s assets are analyzed, and some investments may repay a portion of the outstanding debt. The bankruptcy process allows individuals or businesses to resume their financial lives by forgiving debts they can no longer repay while giving creditors a chance to receive some measure of repayment based on the liquidated assets they have available. As a whole, bankruptcy benefits the economy by providing companies and individuals another chance to access credit and creditors with a portion of the debt they are owed. When bankruptcy proceedings are completed successfully, the debtor is relieved from the debt obligations incurred before filing for bankruptcy.
What Will Happen To My Existing Insurance Policies If I Go Bankrupt?
When you declare bankruptcy, you may lose some of your insurance coverage. It is more likely to happen if you pay your insurance monthly. The insurer may cancel your coverage if you declare bankruptcy, or you may be given a short period to pay off the remainder of the year’s installments if you go bankrupt. You will be unable to renew the cover if you don’t do this. Generally, any insurance would apply, but it’s essential to check:
- Vehicle insurance – you can’t drive if you don’t have a valid policy
- Insurance for buildings and contents
- As a self-employed person, you will need general liability insurance as well as any other guidelines you need
We recommend checking your insurance policy before going bankrupt, even if you pay your premiums in total each year, to make sure you are covered in the event of other conditions.
What To Do If Your Insurance Is Canceled?
Several options are available if you have to pay off the rest of the insurance installments if you go bankrupt:
- You should declare bankruptcy now and pay the remaining installments in your insurer’s timeframe. It might be possible if the monthly payments are small and there are not many left. If you have high monthly payments or a lot of remaining payments, it’s not very realistic.
- Wait until you can afford to pay your insurer after bankruptcy before filing for bankruptcy. If you have 9 or 10 months left to pay, for instance, it will make more sense to wait until there are only 2 or 3 payments left to make to keep the policy if you go bankrupt now.
- Nothing needs to be done if the insurance coverage is no longer needed. In some cases, this might be possible if it relates to a vehicle that will be retired or a job that you’ll be completing.
Is It Possible To Get A New Insurance Policy During Bankruptcy?
Renew any insurance policies you hold since bankruptcy lasts for at least 12 months. bankruptcy will affect your standing and make it harder for you to obtain a policy in the future. Your application may be rejected, or your premium may increase.
Insurance policies may be affected if you go bankrupt. To ensure that you are still protected, you should check what impact going bankrupt will have on your insurance.