How Bankruptcy Affects Your Car Insurance Rates

How bankruptcy affects car insurance rates is based on your credit score. Filing for bankruptcy will give you a bad credit score, which can raise your insurance rates. Not every insurance company checks your credit score when determining risk. If you’re worried how bankruptcy affects your auto insurance rates, enter your ZIP code below to find affordable coverage from local companies near you.

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Natasha McLachlan is a writer who currently lives in Southern California. She is an alumna of California College of the Arts, where she obtained her B.A. in Writing and Literature. Her current work revolves around insurance guides and informational articles. She truly enjoys helping others learn more about everyday, practical matters through her work.

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Laura Walker graduated college with a BS in Criminal Justice with a minor in Political Science. She married her husband and began working in the family insurance business in 2005. She became a licensed agent and wrote P&C business focusing on personal lines insurance for 10 years. Laura serviced existing business and wrote new business. She now uses her insurance background to help educate...

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Reviewed by Laura Walker
Former Licensed Agent

UPDATED: Nov 12, 2020

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Filing for bankruptcy can affect the rates you pay for auto insurance
along with your other financial concerns. A bankruptcy affects your financial stability, and because insurance companies look at your credit score to determine the risk of insuring you, filing for bankruptcy could have serious implications for your car insurance.

Filing bankruptcy is going to give you a bad credit score and a higher car insurance rates.

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.

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