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Buying Term Life Insurance After Bankruptcy


Term Life Insurance and BankruptcyPeople often file bankruptcy in order to erase their overwhelming debt. But bankruptcy can have adverse effects on your term life insurance premium. Read on to find out what kind of repercussions bankruptcy can have on your insurance rates.

Bumps of Bankruptcy

If you own an existing life insurance policy, it will be left untouched by the bankruptcy court in order to safeguard the interests of the beneficiaries. If you own a permanent life insurance policy, you will be allowed to retain only a portion of the cash value that has accumulated on it. How much you are entitled to upon declaring bankruptcy depends on the state you live in. You have to surrender the policy in the court if you have taken out a life insurance policy in the name of your spouse or children.


Possible Policy

The first few years on a policy are the most expensive for a life insurance company and their high up-front costs make them very cautious when approving policies. Companies typically look at your bankruptcy as lack of responsibility and they will consider you a high risk customer. As long as your credit report is displaying bankruptcy, it will be more difficult and more expensive to get a term life insurance policy.


Buying After Bankruptcy

Your bankruptcy will follow you for up to ten years. Because term life insurance is a purchase that should not be put off, waiting out for a decade until your credit report stops reflecting your bankruptcy is not advisable. The better option is to buy a 10 year term life insurance policy. At first, you will pay higher premiums, but it is better than putting your family’s welfare at risk. Once your bankruptcy is taken off your credit report you can ask your term life insurance company to review your policy as you will qualify for lower premiums.

The good news is that there are term life companies out there who will look favorably on your case if they know that your bankruptcy has been completely discharged. QuickQuote agents can help you identify such companies. Inform your agent if you have filed for bankruptcy in the last five years and he or she will help find the best company for you.


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