Obviously, the decision to file for bankruptcy was not one you and your family took lightly. However, now that debts are being settled, you may begin to wonder how your bankruptcy status will impact your insurance rates. While bankruptcy does not directly impact your insurance rates and premiums, it does have an impact on your credit score which in turn, can impact insurance policies. The Jones Law Firm explains.
There are many factors that go into the determination of an individual’s car and home insurance rate. These include:
As far as bankruptcy impacts are concerned, the only direct link is to your credit score. In the United States, auto insurance and homeowners insurance dealers will look at two types of credit scores. Your FICO scores (based upon your credit score and report) and credit-based insurance scores.
According to the Insurance Information Institute (III), “Insurance scores (also called “credit-based insurance scores”) are confidential numerical ratings based in whole or in part on a consumer's credit information. Many insurers use these scores in conjunction with other factors to help underwrite and price policies, typically for personal lines such as homeowners and personal automobile insurance.”
These scores are not interchangeable as they do not accomplish the exact same thing. Your credit score shows and predicts delinquency while insurance scores can predict insurance losses.
Though both are based on a person’s credit report, insurance scores determine how well an individual manages his or her money. This works to estimate insurance risk as well as “outstanding debt, length of credit history, late payments, collections and bankruptcies, and new applications for credit.”
No, your insurance rates will not likely always be high. While your credit score is part of the determination, other factors come into play. But making timely payments, being a safe driver, etc. will help get those rates down over time.
Bankruptcy is the first step to financial freedom. The Jones Law Firm can help you navigate the in-between.
When it comes to filing for bankruptcy in Columbus and central Ohio, you need to know what options are available to you and that you can move forward after a bankruptcy filing. If you are facing debts you can’t pay and are considering bankruptcy, learn more about how The Jones Law Firm can help you or contact us for a free consultation about your options.