Auto Insurance Premiums and Bankruptcy
Auto Insurance Premiums and Bankruptcy
Bankruptcy used to be something that only financially irresponsible individuals turned to. Today however, hard-working people from every class are facing harsh economic conditions. Every day people are losing their jobs or having their hours cut back. They’re struggling to hold onto their homes and cars and trying hard to make ends meet. Sometimes it’s just not possible. As a last resort, people who have never had trouble managing their finances are turning to bankruptcy for immediate relief.
Long term consequences
While filing for bankruptcy may alleviate the immediate financial pressure, there most likely will be long-term consequences. Most notably, a bankruptcy filing will appear on your credit record and remain there up to 10 years. The bankruptcy will lower your credit score, and that, believe it or not, will have an effect how much you pay for auto insurance.
If you’ve been with the same auto insurance provider for a while, you may have an advantage. The policyholders that have established a solid track record to safe driving and on-time payments may see no or very little change in their rates.
Communication is the key
However, since many auto insurance companies use credit records in their risk assessment process, there’s no way to guarantee your rates will be unaffected. Your best bet is to communicate your financial situation with your auto insurance agent and continue your safe driving and on-time payment records.
If after filing for bankruptcy you need to rearrange your policy payment method, do so immediately. Always follow up to confirm that the necessary changes have been made. You don’t want your payments arriving late, which may trigger late fees and additional negative information on your credit record. If your payment doesn’t arrive at all, that could trigger a policy cancellation and leave you without coverage. Lapses in coverage will almost always translate into higher-cost premiums for the foreseeable future.
If on the other hand, your credit record was spotty before filing for bankruptcy, don’t be surprised if you are hit with a sizable rate increase. If you try switching to another provider, you’ll probably be quoted higher rates. Those that use bankruptcy to determine risk may even be unwilling to insure you.
The bottom line is this
A bankruptcy on your credit record is like having a traffic accident on your driving record: both indicate higher risk. Higher rates on auto insurance premiums are an insurer’s way of lowering their risks.