If you are in debt or had previous insolvency, the effect on your insurance cover may not be top of your agenda, but it is important to be aware of any implications that a formal debt solution may have on any insurance policies you have.
Why your debt matters to insurers
Whenever someone is the subject of a formal debt solution, such as a County Court judgement (CCJ), bankruptcy, liquidation or insolvency, a record goes on your credit file, where it remains for a statutory period. When you apply for, or renew insurances, the insurance companies can check your credit score to help assess your financial situation and your ability to pay your premiums on time.
When you’re applying for an insurance policy it’s imperative when asked about any debts or previous insolvency’s that you answer these questions fully, even when being asked about spent or discharged debts.
The impact of debt or previous Insolvency’s on insurance
You can’t drive a car without insurance; you may be required to have specific insurance for your mortgage; or as a business owner, you’ll need employers liability and other specialist insurance policies. Unfortunately, being in debt or having previous insolvency can put at risk your ability to have the necessary insurance. For example:
- You are considered high risk: Insurers may feel you are more likely to miss payments or not be able to afford the cover premium.
- You may be charged higher premiums: If you are considered a higher risk you are likely to see your premium costs rise, to negate the risk of providing you insurance.
- Your insurance policy may be cancelled: This is more likely if you pay by monthly instalments, but insurers may decide to cancel your policy (if you fail to disclose a previous insolvency) or give you a short period of time to pay the full amount of the policy
- Decline cover: Insurers may decline to provide a quote if your credit score is lowered.
Even if you have paid your annual insurance premium in full, it is worth checking your situation with your insurer should you have debt declared or enter insolvency proceedings during the year of the premium. There may be conditions in your policy that are affected by this.
Failure to disclose debt
If you fail to disclose a current debt or a previous insolvency, or report a new debt action, it can have serious consequences. This would include a Company Voluntary Arrangement (CVA), which is usually trigger for Entrepreneurs tax relief.
If you try to make a subsequent claim on your insurance and your insurers discover your situation, they may decide to refuse your claim and cancel your policy either with immediate effect or from the start date. This means you could lose out financially on a pay-out, just when you need it most.
Understanding your options
If you have debt, previous insolvency, bankruptcy or CCJ’s and you’re only looking for your insurance online, you may find yourself being automatically declined based on your credit score alone.
At Glowsure, we work with every client on a one-to-one basis, looking at each individual situation. Being transparent with us about your financial circumstances doesn’t mean you will be refused insurance. It enables us to find the right insurance solution for you.
Glowsure Insurance Brokers can help you find the right insurance, diligently reviewing terms, conditions and policy limitations and exclusions to help you avoid the risk of being underinsured or cancelled. If you would like to talk about how we can help you, contact us online or call us on 01730 239387.