Filing bankruptcy is the last resort for many people who are struggling hard to come out of debts. But do you know that filing bankruptcy can affect your insurance premium? This article will discuss whether there is any repercussion on the life insurance rate due to the bankruptcy process.
Bankruptcy and life insurance
Your existing life insurance policy is left untouched by the bankruptcy court in order to safeguard the interests of the beneficiaries. If your life insurance policy is permanent then your court will allow you to keep a considerable amount of the cash value that has been collected on it. Your state law will determine the percentage you can retain. But you have to surrender the policy in the court if you have taken out a life insurance policy on the name of your spouse or your children.
Your life insurance rate will be affected by your bankruptcy filing. People file bankruptcy to discharge their piling debts. But bankruptcy has an adverse effect on your credit report and your poor credit score will have a negative effect on your life insurance premium rates.
It is advised to avoid buying a life insurance policy if you have a bad credit score. If your credit score is poor the premiums will be high and situation will worsen if you are under financial crisis. Therefore, if you have recently filed bankruptcy then wait before you apply for a life insurance policy.
Your policy companies will consider your bankruptcy declaration as lack of responsibility towards your finances. They will be doubtful about you being able to pay your premiums. Your bankruptcy stigma will remain on your credit report for 7 to 10 years.
Is it possible to get life insurance policy after bankruptcy?
As long as your credit report is displaying bankruptcy, avoid buying an insurance policy. Buy a life insurance policy with a 10 year term. Initial years are quite a risk for an insurance company and the exorbitant up front fee makes them cautious before approving policies to individuals, especially people declaring bankruptcy in the recent past. These kinds of people will be considered as high risk customers.
There are term life insurance companies who might give a positive feedback if your bankruptcy has been completely discharged. Do an extensive online research to find these types of companies. You can submit an online form if you have completed at least 5 years of filing bankruptcy.
Once your bankruptcy is discharged from the credit report then you can request your policy company to evaluate your policy so that you can avail the lower premiums.