How Does a Car Repossession Affect Your Insurance Rates?

Having your vehicle repossessed can be an extremely stressful and challenging situation. On top of the financial impact, many consumers find their car insurance rates increase after a repossession. This article will explain how and why a repo can drive up your insurance costs, how long it affects your rates, and ways you may be able to minimize the impact.

Overview of How Repossession Impacts Insurance

There are a few key ways that having your car repossessed can negatively affect what you pay for car insurance:

• Credit score hit – A repossession causes significant credit damage, which most insurers use to set rates. Lower credit scores result in higher premiums.

• Higher risk – Data shows drivers with a recent repossession file more claims. You may be classified as higher risk.

• Gaps in coverage – Lapse in insurance around the repo period often leads to fee hikes.

• Policy changes – You may switch to high risk or non-standard carriers with pricier plans.

Depending on your specific situation, you may see your rates jump anywhere from 10% up to 100% or more. The increase is usually most extreme if you need a high-risk or SR-22 policy after a repossession.

How Long a Repo Affects Your Insurance Rates

The negative impact of a repossession on your car insurance rates can persist for years. Here’s a general timeline:

• 1-3 years – Most significant rate hikes occur in the first few years after a repo. You’ll pay the highest premiums during this period.

• 3-5 years – Rates will improve slightly but still likely be elevated compared to before the repossession.

• 5-7 years – Premium costs improve as the repo ages but may still be 10-30% higher than pre-repo rates.

• 7+ years – After seven years, the repossession can no longer be considered in rate setting. Rates normalize.

It’s important to note these timeframes assume you have no further driving incidents or credit issues. Any additional negatives that occur after the repo will cause rates to spike again and extend the rate impact. Maintaining clean driving and credit is key to rates rebounding quicker.

Steps to Minimize the Insurance Rate Increase

While you can’t completely avoid a rate increase following a repossession, there are some proactive steps you can take to minimize the financial impact:

• Shop for quotes – Compare quotes from various insurers to find the best repo-friendly rate available. Avoid gaps in coverage.

• Ask about discounts – Inquire about ways to save such as defensive driving courses, low mileage, bundling policies, and more.

• Raise deductibles – Opting for higher deductibles can help offset rate hikes. Just be sure you have savings to cover the deductible costs in case of a claim.

• Improve credit – Work on rebuilding your credit score through on-time payments, lowering balances, and disputing errors. A higher score will help improve rates over time.

• Enroll in usage programs – Insurers like Progressive and Allstate offer programs to score discounts based on your actual driving habits tracked with an app or OBD device.

• Maintain clean driving – Avoid tickets, at-fault accidents, DUIs, and other violations to prevent your rates from going up even more.

Will High-Risk Insurance Be Required After Repo?

In some situations, a standard insurer may no longer cover you after a repossession, forcing you into the high-risk insurance market. Here’s what you need to know:

• You’ll most often need a high-risk or non-standard policy if you allowed your prior insurance to lapse or cancel after the repo. Failing to maintain continuous coverage is a big red flag for standard carriers.

• If you have poor credit and a driving record with multiple incidents, standard insurers may not accept you. High-risk policies are your only option until your record improves.

• An SR-22 certificate of insurance may be required to reinstate a suspended license after a repo. SR-22 policies come from high-risk carriers.

• Rates through high-risk insurers are substantially higher – often double the average costs. But they may be your only choice if you can’t obtain standard coverage.

• Ask your agent for help finding the most affordable option for your situation. Work on improving your record over