Can declaring bankruptcy keep me from getting home insurance?
UPDATED: Jul 21, 2015
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Asked July 21, 2015
When you file a bankruptcy, it has consequences which echo throughout your financial transactions, even to your homeowners insurance. Some people automatically assume that having a bankruptcy on your record means that you cannot get home insurance, but a bankruptcy alone cannot prevent you from getting coverage and homeowners insurance is still available to people with bad credit.
A bankruptcy has a definite impact on your credit score, and it is through your credit score that your homeowner's policy will be affected. As your credit score goes down, the premiums you can expect to pay will increase, and when your score is extremely low, you may find yourself with limited options on home insurance. You can get home insurance regardless of your credit, but the costs increase dramatically.
Your credit score is used by insurance companies to determine the risks associated with any future claims you may file. Statistically, someone with a low credit score is more likely to file a homeowner's claim than someone with a perfect credit score. Because of this, your bankruptcy will cause higher rates, and if the risk is too high, meaning your credit score is low, and then you may only be able to get coverage through a high risk insurance company at much higher rates than before the bankruptcy.
Another factor to consider is that a bankruptcy will only stay on your credit report for 7 years. After that time, the adverse effects of the bankruptcy will be lifted, and our rates will start to go back down. If you are buying a home, it would be in your best financial interest to postpone the purchase until after the bankruptcy is lifted from your credit score. This will save you money on the home loan as well as your subsequent insurance costs.
Answered July 24, 2015 by Anonymous