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Turning It Around: Getting Car Insurance in Tough Times

On Friday, April 10th, 2015

Is it possible to get car insurance even after you’ve ruined your credit for good?  How are people supposed to drive if they can’t even get approved for car insurance?  Is it time to take the bus full-time?

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No, believe it or not, even if you have bad credit it’s not the end of the world.  You can still find an auto insurance policy—it just might take some searching around.  There’s also no such thing as “credit ruined for good” because you can always work your way back up to manageable debt.  For one thing, bad credit only stays on your report for 7 years with most creditors. Furthermore, if you pay off your bad debt—especially liens, government debt, etc.

When it comes time to shop for a new policy, it can be challenging but it must be done—because driving with a lapsed police is illegal and you will be penalized.  It is true that that many insurance companies do not want to provide a policy for a person with bad credit.  However, you can either pay for premiums and work your way up to a lower price, as you gradually decrease your debt while also avoiding traffic incidents, or you could look through an “assigned risk pool”.  This refers to a pool of insurance companies who provide insurance policies for hard to insure drivers.  Each state has this and working through the Department of Insurance, you can find a list to contact.

Tips for Applying for Insurance with Bad Credit

  • Never lie on the application as this will void all offers of coverage.  If you lie about anything, even pre-existing coverage will be voided.
  • Search through the pool as well as top name providers in your area.  You never know until you try and may be surprised to learn that, competitively, your credit is not necessarily worse than anyone else’s in your area.  For example, you could try to learn about Mercury insurance.
  • Take steps to lower your debt.  You can do this by paying installment payments, or in some cases, arranging for a refinancing plan.  Sometimes opening additional credit cards (and not spending more debt, of course) can also help improve score.
  • Remember, the less you drive your vehicle the less you will put it in danger.  This is a factor many self-employed individuals take, who log their own driving according to business hours.
  • You can also find a discount by eliminating full coverage insurance on an older model car and simply paying for liability insurance—at least for a few years, as you work on building back up your credit.
  • Don’t forget to investigate all possible leads for cheaper premiums; for example, if you get married and are over the age of 30 you could qualify for cheaper rates

Will you be paying more?  Of course, and it’s not only because you’ve done a naughty thing; statistically speaking, and according to the Insurance Information Institute, people with bad credit file are more likely to file claims than people with average to good credit.  Therefore, just by statistics alone, the insurance company has to ensure a profit by demographics.  The premiums will be slightly higher, but they can be reduced by consistently driving.

 

Posted in Auto News

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