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How Do Bankruptcy and Life Insurance Relate
Can Bankruptcy and Life Insurance Cause Problems
When it comes to bankruptcy and life insurance, often there are a lot of questions that come up. Some of them relate to life insurance. Here at General Insurance, we want to make sure you have the information you need, and that we are interested in working with you as you explore your options for getting a life insurance policy. There are a number of types of bankruptcy, each of which affects your financial future differently. In addition, people file for bankruptcy for different reasons, which also has an effect on things.
Bankruptcy is not fun. It takes time to recover from and can come with some stress. Depending on whether you file for chapter 7, chapter 11, or chapter 13 bankruptcy (the most relevant ones), the effects on obtaining a life insurance policy might be more complex.
Chapter 7: This is usually a faster way to declare bankruptcy. It is a liquidation of your bankruptcy estate.
Chapter 11: Most often known as «reorganization». This allows debts to be repaid while assets and cash flow are monitored. It can help people that want to move forward while paying off what they owe.
Chapter 13: This bankruptcy is for people that have a regular source of income, but cannot manage what they owe with the amount of income they are making. Payments are strict and enforced. This can also help people that want to move forward while they pay off what they owe.
How Does Bankruptcy Impact Term Life Insurance Applications
Bankruptcy is a difficult legally binding event in the life of any person, and it can impact the lives of your loved ones as well. It’s important to avoid compounding those financial frustrations by failing to adequately acquire life insurance for the protection of those you care about the most. Term Life Insurance and Whole Life Insurance policies are available to you now, even if you have recently filed for bankruptcy or are still under bankruptcy protection at the present time.
Life insurance companies do look closely at applications from potential clients who have filed for bankruptcy protection in the past. They use this information for actuarial predictions based on factors including stress and the state of your mental health, presumed anxiety, depression and financial need. They also take the possibility of suicide as a serious threat. Insurance experts at GeneralInsurance.com can help you navigate the application process to find the best insurance with a free quote from multiple carriers as you overcome the challenges of a past bankruptcy and move forward with your life, properly insured.
Moving Forward With Bankruptcy and Life Insurance
If you have filed one of the three bankruptcies listed about, read on to get more information about life insurance and bankruptcy. If you are currently filing for bankruptcy, you may need to wait until there is a clearing, settlement, or discharge in order to apply. If you are filing for Chapter 7 bankruptcy, you will need to wait 360 days after filing before you can apply.
Why bankruptcy can be a big deal when it comes to life insurance:
Companies consider many factors when it comes to health in terms of life insurance. Stress, mental health, anxiety, and other issues are some things that insurance companies consider after bankruptcy. Another variable that has an impact is what much coverage you will be eligible to purchase. Life insurance companies have a limit to the amount of coverage a person can buy, and that limit is based on income (with some exceptions).
How to Apply For Life Insurance After Bankruptcy
Here are the steps you need to go through in order to get through your bankruptcy and life insurance needs:
- If you filed a Chapter 7 bankruptcy, wait one year before applying
- Let the insurance company know you have filed for bankruptcy
- Have the dates needed, including your filing date and discharge date, handy
- Have an understanding of your current budget
As with many types of insurance, each live insurance carrier views bankruptcy a little differently. Communicating up front will help the insurance company communicate to you the information you need to get the best policy for you and your loved ones. When you file for bankruptcy, it stays with you for a long time, so even if the bankruptcy was a long time ago, it should still be communicated.
If You Have a Policy and Then File For Bankruptcy
If you already have (or had) a life insurance policy before you filed for bankruptcy, there are two factors that should be looked at. If you already have a term policy, bankruptcy will not affect it so long as you are making your payments. This is because there is no cash value in the policy, the value is in its maturity.
If you have a universal or whole life insurance policy, there may be cash value inside the insurance policy. This may be able to be assessed up to a certain amount. It could be assessed entirely. Contacting a legal professional in your state (in your state) is important for understanding rules, regulations, and life insurance exceptions.
We are happy to help with any questions you have and to speak with you more about bankruptcy and life insurance. Both of these things are serious, so good research and knowledge are important.
Regardless of your reasoning, at General Insurance we have the professional staff that can help you get to make the best decision when it comes to life insurance coverage.