How To Get Life Insurance With a Bankruptcy Record [2024]
Buying term life insurance after bankruptcy may seem daunting, however, there are options for life insurance after declaring bankruptcy. Filing for bankruptcy can have a direct influence on which rating class your policy receives, your application approval, and what types of rates you'll be eligible for. In many cases, you may be limited to term life insurance policies under 10 years if you're shopping for life insurance after going bankrupt. Before you buy term life insurance, compare quotes so you know you are getting the best price.
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Daniel Walker
Licensed Insurance Agent
Daniel Walker graduated with a BS in Administrative Management in 2005 and has run his family’s insurance agency, FCI Agency, for over 15 years (BBB A+). He is licensed as an insurance agent to write property and casualty insurance, including home, life, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. To ensure our content is accura...
Licensed Insurance Agent
UPDATED: Nov 20, 2024
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Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance company and cannot guarantee quotes from any single company.
Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.
UPDATED: Nov 20, 2024
It’s all about you. We want to help you make the right life insurance coverage choices.
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance company and cannot guarantee quotes from any single company.
Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
What you need to know…
- Purchasing life insurance after declaring bankruptcy will most likely increase your rates for about 10 years
- How bankruptcy impacts your life insurance will depend on the type of bankruptcy you declared, and the severity
- If your life insurance company declares bankruptcy you’ll need to switch companies in a hurry
Buying term life insurance after bankruptcy can appear challenging and filing for bankruptcy can have an impact on your term life insurance quotes. Buying life insurance after bankruptcy isn’t impossible, however.
Bankruptcy and insurance both protect in worst-case scenarios. That’s why we’ll tell you what happens to your life insurance policy if you file for bankruptcy, if your insurance provider files for bankruptcy, and how to get life insurance after going bankrupt.
Shopping for life insurance after bankruptcy is still important if you want to protect your family’s financial future. Get ahead today by comparing competitive term life insurance rates using our FREE quote tool above.
How does bankruptcy affect life insurance policy?
Bankruptcy is a court proceeding that involves examining your assets and debts. The court decides if you have the means to pay all, some, or none of your debt.
Filing bankruptcy is a serious step with long-term credit and financial consequences, so it should be used as a last resort. How much you are entitled to keep after declaring bankruptcy depends on the state where you live.
How do life insurance companies view bankruptcy? They consider it a pretty big deal – but there’s always a company willing to take a chance on you.
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. So bankruptcy can affect any policies you have on your spouse or children.
However, if you secure a term life insurance plan early, you will not only save on your premiums, but you will maintain a secure policy even after filing a bankruptcy claim. How does bankruptcy affect my life insurance premiums?
Check out these rates to see how much you can save if you lock in term life insurance today.
Life: Average Male vs. Female Rates for Top 10 Insurers
| Age | $100,000: Male | $100,000: Female | $250,000: Male | $250,000: Female |
|---|---|---|---|---|
| 25 | $11.03 | $10.02 | $22.10 | $12.91 |
| 30 | $11.12 | $10.07 | $15.31 | $13.02 |
| 35 | $11.12 | $10.07 | $15.42 | $13.02 |
| 40 | $12.65 | $11.12 | $17.94 | $15.21 |
| 45 | $14.57 | $13.31 | $21.55 | $19.69 |
| 50 | $18.60 | $17.20 | $30.19 | $27.02 |
| 55 | $24.51 | $20.61 | $42.88 | $34.35 |
| 60 | $35.88 | $27.48 | $71.10 | $50.86 |
| 65 | $51.06 | $37.76 | $109.82 | $75.14 |
As you read on, you’ll see why purchasing insurance earlier on will keep your family secure even if you run into financial troubles.
Your life insurance quotes are always free.
Secured with SHA-256 Encryption
Your life insurance quotes are always free.
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Life Insurance Eligibility by Type of Bankruptcy
You may ask, does filing for bankruptcy ruin your life? Can I get life insurance if I’ve filed for bankruptcy? It’s important to know the benefits and the risk associated with filing bankruptcy. There are several types of bankruptcy, one which is chapter 7 and another is chapter 13.
A Chapter 7 bankruptcy governs the process of liquidation under the bankruptcy laws of the United States and is the most common form of bankruptcy in the United States. Chapter 7 requires a repayment plan but does require you to liquidate or sell nonexempt assets to pay back creditors.
A Chapter 13 bankruptcy eliminates qualified debt through a repayment plan over a three- or five-year period. This may make you wonder whether you can get life insurance after filing bankruptcy. The answer is yes.
Since Chapter 13 is not as severe as Chapter 7, you may be able to successfully apply for life insurance before the bankruptcy has been discharged. Some carriers only offer limited coverage if your Chapter 13 bankruptcy hasn’t been discharged. Others may offer you full coverage.
Other forms of bankruptcy that you may have heard of like Chapter 11 are usually applicable to businesses or other entities and wouldn’t apply to individuals.
Can life insurance be seized by creditors?
Life insurance is an asset and so when it comes to bankruptcy and life insurance, courts will review assets and make decisions on whether the assets are exempt. In general, your life insurance will be considered in one of the following scenarios.
- In most cases, standard life insurance policy proceeds are exempt from creditors
- Proceeds may not be exempt if your spouse is your beneficiary and you co-signed certain types of loans
- Is a life insurance beneficiary responsible for debt? Once your beneficiary receives your life insurance death benefit, those funds could be claimed by creditors seeking money they owe (depending on state regulations)
Term life insurance policies do not have any cash asset value and are considered during bankruptcy proceedings. Can my insurance proceeds be used to pay off creditors? If your policy holds cash value, yes.
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Insurance Company Guidelines
The first few years of a policy are the most expensive for a life insurance company and their high up-front costs make them very cautious when approving applications. Companies typically look at your bankruptcy as a lack of responsibility, and they may consider you a high-risk customer.
Like everything else considered with life insurance underwriting guidelines, your personal situation will affect your rate.
If you are currently in bankruptcy, you won’t be able to qualify for a new term life policy. Most companies will wait to approve your application until your bankruptcy has been discharged for one year.
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Life Insurance Cash Value with Bankruptcy
The cash value of your life insurance policy is therefore one of your assets; it is something you own that can be liquidated and has a value.
When dealing with a life insurance policy in bankruptcy, the cash value is a type of asset that is protected, up to a certain amount, by your bankruptcy exemptions.
Buying Life Insurance After Declaring Bankruptcy
I declared bankruptcy, can I buy life insurance? You can, however, you’ll want to start shopping with the expectation that you may see higher rates, face rejection, or not be given the same policy options as an Average Joe.
How long might bankruptcy affect a life insurance application? 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 no longer shows on 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. Our licensed insurance professionals will help you identify these companies and help find the best one for you.
Insurance Companies and Bankruptcy
The other side of the coin is what do in the case of a life insurance agent bankruptcy or the bankruptcy of a company that issued your insurance policy? Do life insurance companies go out of business?
When there is an economic slump, individuals are not the only ones affected, many businesses are also affected. You may be wondering what happens if my life insurance company goes bankrupt?
If or when you get word that your life insurance company is filing bankruptcy it is important to start looking for another reliable company. The National Association of Insurance Commissioners can help you find out if a life insurance company is troubled.
You can also ask the life insurance company if they are giving anything back to their customers for years paid or if it can be switched to another company they may partner with.
Unfortunately, there is no insurance for bankruptcy for individuals or corporations.
Your life insurance quotes are always free.
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Case Studies: Getting Life Insurance With a Bankruptcy Record
Case Study 1: Limited Coverage Options
After filing for bankruptcy, Michael wanted to purchase life insurance to protect his family’s financial future. However, he discovered that his bankruptcy record had an impact on his application. Insurance companies viewed him as a higher risk customer and offered him limited coverage options.
Michael had to settle for a term life insurance policy under 10 years, which meant he had less flexibility in choosing a policy that met his long-term needs.
Case Study 2: Higher Premium Rates
Jennifer had recently gone through bankruptcy and decided to shop for life insurance. She received quotes from different insurers but noticed that her bankruptcy history resulted in higher premium rates.
The insurance companies considered bankruptcy as a sign of financial instability and adjusted the rates accordingly. Jennifer had to weigh the cost of premiums against the coverage amount she desired.
Case Study 3: Waiting Period After Bankruptcy
Robert had successfully navigated through bankruptcy and wanted to secure life insurance coverage. However, he learned that insurance companies typically wait until the bankruptcy has been discharged for at least one year before approving an application.
Robert had to wait patiently for the designated waiting period to pass before he could obtain the life insurance policy he desired.
Case Study 4: Limited Policy Options
Samantha had filed for Chapter 13 bankruptcy, which offered a repayment plan over a specified period. She believed that her bankruptcy type would allow her to qualify for life insurance coverage before the discharge. However, she discovered that not all insurance companies were willing to provide full coverage.
Some insurers only offered limited coverage until the bankruptcy had been discharged, which affected Samantha’s ability to choose a comprehensive policy.
Buying Term Life Insurance After Bankruptcy: The Bottom Line
When it comes to bankruptcy it is important to understand the ends and outs and what exactly bankruptcy can affect. Depending on the type of policy it can be considered as income.
It is important to know the differences. Keep in mind that you can change your beneficiary on your life insurance policy at any time even before filing bankruptcy.
Read more: Can you change your life insurance beneficiary?
Of course, securing a term life policy now will allow you to protect your family before and even after a bankruptcy. Why wait another minute?
Ready to start buying affordable term life insurance after bankruptcy? Start comparing term life insurance quotes with our FREE quote generator to protect your family and your pockets.
Frequently Asked Questions
How does bankruptcy affect a life insurance policy?
Depending on the type of bankruptcy you file, your life insurance policy may be affected. In some cases, you may have to surrender the policy in court if it’s in the name of your spouse or children. Additionally, if your policy has cash value, it may be considered an asset and can be used to pay off creditors.
Can I get life insurance after filing for bankruptcy?
Yes, it is possible to get life insurance after filing for bankruptcy. However, keep in mind that bankruptcy may affect the approval process and rates you’re offered. Some insurers may view bankruptcy as a sign of higher risk and may offer limited coverage or higher premiums.
How long does bankruptcy affect a life insurance application?
Bankruptcy can stay on your credit report for up to 10 years. Waiting for a decade until your credit report no longer reflects bankruptcy is not advisable when it comes to purchasing life insurance.
Instead, you can consider buying a 10-year term life insurance policy initially, with the expectation of higher premiums. Once your bankruptcy is no longer on your credit report, you can ask your insurance company to review your policy and potentially qualify for lower premiums.
What happens if my life insurance company goes bankrupt?
In the event that your life insurance company goes bankrupt, it is important to start looking for another reliable company. Check with the National Association of Insurance Commissioners to find out if a company is in trouble.
If your insurance company is filing for bankruptcy, you may want to ask about options to switch to another company they may partner with or if any compensation is available for years paid.
Can I change the beneficiary on my life insurance policy before filing for bankruptcy?
Yes, you can change the beneficiary on your life insurance policy at any time, including before filing for bankruptcy. It’s important to understand the implications and legal requirements related to changing beneficiaries, so consulting with an attorney or financial advisor may be beneficial.
How can I buy term life insurance after bankruptcy?
To purchase term life insurance after bankruptcy, start by comparing quotes from different insurance companies. Be prepared for the possibility of higher rates or limited coverage options initially. Consider working with licensed insurance professionals who can help identify companies that may be more favorable toward individuals with a bankruptcy history. Use our free online quote tool to compare affordable term life insurance options and protect your family’s financial well-being.
Your life insurance quotes are always free.
Secured with SHA-256 Encryption
Daniel Walker
Licensed Insurance Agent
Daniel Walker graduated with a BS in Administrative Management in 2005 and has run his family’s insurance agency, FCI Agency, for over 15 years (BBB A+). He is licensed as an insurance agent to write property and casualty insurance, including home, life, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. To ensure our content is accura...
Licensed Insurance Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.
