How Bankruptcy Affects Your Car Insurance Rates
Filing for bankruptcy can affect the rates you pay for auto insurance along with your other financial concerns. Because a bankruptcy affects your financial stability and because insurance companies look at your credit score to determine the risk of insuring you, filing a bankruptcy could have serious implications for your car insurance. Filing a bankruptcy is going to give you a bad credit score and a higher rate for car insurance is one of the side effects.
You may not know it, but insurance, even car insurance, is a financial transaction. You are paying premiums on a policy, and in return for your payments, the insurance company is agreeing to stand behind your vehicle for the duration of the policy, regardless of what it ends up costing. Because the insurance company has so much on the line, they look at your credit score to determine whether you are an insurable risk. Higher credit scores mean less of a financial risk, and lower scores mean paying higher premiums.
If you already have a car insurance policy in effect, your insurance company may not check your credit score until it is time to renew the policy. That means that your rates will not go up immediately after you file for bankruptcy, but the next time your policy is up for renewal it could. Even worse, if the bankruptcy pushed your credit score too low, you could be denied coverage or have your policy canceled at renewal time.
In the meantime, look for ways to keep the cost of auto insurance down. Many safety features built into cars will earn discounts, including such things as anti-lock brakes, electronic stability control, and anti-theft devices. Additionally, if your car has airbags, you would be eligible for a discount based on those, and the discounts increase as these things are combined, saving you even more money overall. You may not be able to completely erase the effects of a bankruptcy on your car insurance, but with some careful planning you should be able to prevent your premiums from rising beyond what you can afford to pay.