Purchasing Life Insurance After Bankruptcy
Term life insurance can offer you a level of financial protection no matter what obstacles you stumble upon, like bankruptcy. It’s something you never think you’ll have to face. Sometimes, however, you’re thrown a curveball on your way through life’s journeys. Job loss, disability, or even a death in the family can mean a reduction in your household income.You may then have to cut costs and live within reduced means. Sometimes, though, it may be awhile before things get better and you may file bankruptcy along that route to relieve financial burdens.
Unfortunately, when making changes to your family budget, you may stop the premiums on your life insurance thinking it’s an expense you can pick up later. A term life insurance policy may be allowed to lapse or a permanent life insurance policy may be surrendered for its cash value. But when your finances are stabilized – the bankruptcy has cleared and your earnings are in better shape, you may want to look into getting back the life insurance policy you let lapse or surrendered before. The question is – now that insurance companies are looking at credit history – will you be able to get insurance and if not, how long do you have to wait?
Every insurance company is different in how they look at bankruptcy; the type of bankruptcy will be matter as well – Chapter 7, 11 or 13. The general rule of thumb is that the bankruptcy must be fully discharged, and some insurance companies may want to wait until two years have passed. When you’re applying for your life insurance, you’ll need to show:
- stable employment
- income verification (carriers have financial questionnaires)
- bankruptcy discharge papers
- tax returns
However, if you’ve filed for bankruptcy more than once, unfortunately you may not be eligible for life insurance coverage.
About the author: Melanie Tretheway has been in the life insurance business for over 30 years. She is a mother of two who loves baking, reading, gardening, and taking care of her family. Melanie takes great pride in making sure you are informed, especially when it comes to choosing the right life insurance policy for your family. You can contact Melanie at 1-800-651-1953 or MTretheway@Pivot.com.