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3 min read
8th April 2022

Adverse Financial History And Insurance

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Personal/Business Insurance

Entering bankruptcy, a DRO or an IVA can have an effect on your insurance.

Motor Insurancefor a private individual this isn’t normally an issue as very few Insurers ask for details of any adverse financials in their quotation process. This can be different for commercial vehicles and for policies arranged in a company name so it is always important to carefully read through the questions asked to ensure that you are not failing to disclose ‘material facts’ which could result in an Insurer voiding your policy.

Home Insurancethis is rather different to motor insurance in that virtually every insurer asks the question ‘Have you, or any person living with you, ever had any financial or legal problems such as bankruptcy, liquidations or CCJ’s.’ The important aspect here is to note the phrase ‘or any person living with you’ — it’s not just a case of insuring in one person’s name if the spouse/partner has been declared bankrupt.

Commercial Insuranceagain this is similar to home insurance in that most insurers will ask if ‘any owner, director or partner has ever been declared bankrupt, insolvent, received any CCJ’s. or entered into an IVA.’ Again, this is fairly comprehensive and failure to disclose any such history could lead to a policy being voided.


Directors of a company that was previously liquidated also have a duty to disclose this and again, failure to do so may result in any claim under a new policy being repudiated. Whatever type of adverse financial history you may have it should always be disclosed to ensure that you will be covered in the event of a claim.

Case Study: We were recently approached by a director of a catering company who had had 2 previous companies liquidated. He was looking for £5m Public Liability & £10m Employers Liability cover for a new venture. We were able to obtain an acceptable quotation within 48 hours and arrange immediate cover including payment by instalments.

Many people ask why having an adverse financial history has an effect on insurance. The answer is, to use an old fashioned insurance term, that many insurers consider this to be a sign of a higher moral hazard. Richard, a Cover4Insurance Account Manager, said:

“We take a different view and believe that each client should be looked at individually and their circumstances taken into account. This being the case we have partnered with a number of Insurer’s for both Home & Commercial Insurance and can normally provide terms for all but the most extreme cases. All we normally need are the amounts of debt involved, when the bankruptcy or IVA was entered into and a brief description of the reasons, coupled with the normal details of what you require cover for, we can then normally obtain terms for you within 48 hours."

Over the last couple of years many businesses & individuals have seen their circumstances affected by Covid and the growing cost of living crisis. At the same time many still retain their entrepreneurial spirit and look to open new ventures. We believe in supporting new ventures and will always do our best to arrange competitive terms for people whatever their previous circumstances.


Bankruptcy is one way for individuals to deal with debts they cannot pay. The process makes sure that your assets are shared between your creditors and lets you make a fresh start free from debt. You will normally be discharged after a twelve month period, subject to some conditions, and your unsecured debts will normally be written off.

The advantage of declaring yourself bankrupt is the writing off of your unsecured debts once the bankruptcy is over. This must be contrasted with fact that your credit rating will be severely affected, your secured debt will still need to be paid and your details will be listed on the Insolvency Register.

There are other options available to an individual such as a Debt Relief Order (DRO) or an Individual Voluntary Arrangement (IVA). The cost of these are lower than for bankruptcy but failure to keep up the payments can result in your being declared bankrupt, details can be found here https://www.gov.uk/options-for-paying-off-your-debts .


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