Car Insurance After Bankruptcy: What to Know

How does bankruptcy affect car insurance rates?

 

Although bankruptcy is not a direct insurance rating factor, its impact on your credit score can lead to higher car insurance rates. A driver's credit score is a primary rating factor used by insurance companies to assign quotes. The lower your credit score, the more you will pay for car insurance. It is possible to find affordable car insurance after bankruptcy — even if it did a number on your credit. We'll dive into the details below.

 

Bankruptcy and car insurance — table of contents

1. Why does bankruptcy affect car insurance?
2. Are there insurance companies that don’t look at credit score?
3. What are the cheapest car insurance companies after bankruptcy?
4. Methodology

 

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What is the best cheap car insurance company after bankruptcy?

The only connection between bankruptcy and car insurance is through credit score. Since most companies use credit score as a rating factor, we've listed below the cheapest car insurance companies for drivers with "very poor" credit (300-579). See our methodology.

 

Company	Very Poor (300-579)
Nationwide	$161
State Farm	$163
GEICO	$174
Erie	$203
USAA	$253
Farmers	$258
Progressive	$271
Average	$237

 

Nationwide is the cheapest car insurance company after bankruptcy. This doesn’t mean Nationwide will be the most affordable company for you, specifically. Car insurance pricing is driver-specific and changes based on your age, where you live, and the vehicle you drive. Use this data as a starting point in your search for car insurance after bankruptcy. Enter your ZIP code below to get personalized quotes.

 

 

Why do bankruptcy and credit scores affect car insurance?

When pricing your policy, an insurer tries to predict how much risk you will present as a client. Indicators such as age, gender, location, vehicle, driving history, and credit score, go into your monthly premium. Like having a bad driving history, having a low credit score may lead to more expensive auto insurance rates. Learn more about what factors affect your rate.

To price policies, car insurance companies rely on studies showing that drivers with poor credit file more claims than do drivers with good credit. If you have poor credit — or have gone through recent bankruptcy proceedings — you're deemed riskier and more expensive to insure.

 

Credit Level	Average Monthly Insurance Rate
Very Poor (300-579)	$237
Fair (580-669)	$187
Good (670-739)	$155
Very Good (740-799)	$129
Exceptional (800-850)	$106

 

Please note: comparing car insurance quotes does not harm your credit score. Car insurance companies will make a soft inquiry into your credit history, rather than a hard inquiry — more commonly utilized during the mortgage-lending process — so your credit score should not take a hit.

 

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Are there any car insurance companies that don't use credit score as a rating factor?

Because credit score is considered to be an accurate determinant of risk, all major car insurance companies use it as a rating factor. However, some states don't allow insurance companies to use credit scores as a pricing tool. California, Hawaii, and Massachusetts do not use credit scores as a rating factor. If you live in one of these states, your credit isn’t an insurance rating factor.

Outside of this, you can consider telematics-based companies and programs if your credit score is causing an expensive insurance premium. Telematics uses the way you drive to determine your premium. In theory, the safer of a driver you are, the cheaper your premium will be. There is only one purely telematics-based company — Root Car Insurance. Root specifically does not use drivers' credit scores to set rates. However, the company's policies are not available in every state. Most major insurance providers also offer similar programs, but credit score remains a rating factor. 

Another company to consider is Metromile. Although Metromile is not telematics-only, the company uses a pay-as-you-go model. Traditional rating factors are still utilized in Metromile's pricing model but your mileage is much more significant. If you're a low mileage driver living in one of the states Metromile writes insurance policies, this might be the company for you.

 

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Methodology

The Zebra conducted comprehensive auto insurance pricing analysis using its proprietary quote engine, comprising data from insurance rating platforms and public rate filings. The Zebra examined nearly 53 million rates to explore trends for specific auto insurance rating factors across all United States zip codes, averaged by state, including Washington, DC.

The study used a consistent base profile for the insured driver: a 30-year-old single male driving a 2013 Honda Accord EX with a good driving history and coverage limits of $50,000 bodily injury liability per person/$100,000 bodily injury liability per accident/$50,000 property damage liability per accident with a $500 deductible for comprehensive and collision. For coverage level data, optional coverage (that must be rejected in writing) is included where applicable, including uninsured motorist coverage and personal injury protection.

National property and casualty losses information is from the Insurance Information Institute and the NOAA National Centers for Environmental Information U.S. Billion-Dollar Weather and Climate Disasters report.

For vehicle data, analysis referenced the most popular vehicles in the U.S. by 2016 year-end sales, according to Goodcarbadcar.net.

Data may vary slightly throughout the report due to rounding.