Ch 7, 13

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Many insurance companies look to your credit score to determine your eligibility for their insurance plans. This is especially true for home insurance and car insurance policies. Because a bankruptcy filing will impact your credit score negatively and will stay in your credit report for up to ten years, some insurance companies may deny you coverage. There are no rules or regulations that govern so you will need to shop around to find insurance companies that will serve your needs.

Home and car insurance

Even if you are current on your insurance premiums, it is within an insurer’s rights to drop you from their policy after you have filed for bankruptcy. Not all do, but some may. Some insurance companies may not issue a new police or renew an old one if they see that your credit score is low due to a bankruptcy filing or any other reason. The reasons for this are manifold, insurance companies want to prevent claims which typically are higher among the financially troubled who in the past have set their homes on fire to collect on their policy.

But just because they are a few bad apples does not mean everybody has to be punished. Talk to your insurer. If you have never made a claim and have always been current on your premium payment, you should appeal the decline of any renewal. At this point, you should also shop around and see if other insurance companies can offer you better policies.

A growing number of auto insurance companies check the credit of potential and existing policy holders regularly, so bankruptcy can affect your car insurance as well. Instead of denying you insurance coverage, many auto insurance companies may offer policies at much higher premiums.

Health Insurance

Since health insurance is considered an essential living expense, health insurance company policies are not governed by credit ratings. Health insurance companies have their own policies which are typically related to your health and they can deny coverage for matters related to your health. With Health Reform passed, however, no one can be denied health insurance coverage based on their health any longer and by 2014 health insurance will become mandatory for everybody. The ability to obtain health insurance should not be affected by your bankruptcy filing.

Life Insurance

Life insurance companies operate the same way as home or car insurance companies. Based on your credit report, they may drop your life insurance coverage after you have filed for bankruptcy. Life insurance companies are wary of insurance fraud and want to ensure that you can afford your insurance premiums without “overinsuring” yourself. When you do file for bankruptcy while you hold a life insurance policy, Federal Bankruptcy regulations mandate that you can protect up $10,775 of a life insurance policy’s cash value from surrender in a bankruptcy.