Placing Insurance Coverage for Bankrupt Clients

• 1). Disclose the facts. The most challenging part of dealing with bankrupt clients is simply finding a carrier that will consider offering a quote. Many insurance companies will immediately decline an application once they find out that a client is in bankruptcy so do not wait until you are ready to bind coverage to disclose this fact. Provide this information up front to insurance companies before requesting a quote.
  
  
• 2). Find a broker or carrier. Well-known, traditional home and auto insurance companies will not be interested in insuring a bankrupt person or business. These carriers like to stick to traditional risks, so you will likely need to approach insurance wholesalers or brokers who have access to a variety of "excess and surplus" insurance companies that specialize in difficult risks.
  
  
• 3). Obtain loss runs. Ask the client for this documentation of their claims history for the past 3 to 5 years. They will be able to get the loss runs directly from their previous carrier. If you have a client that has a great history and has just fallen on hard times, you will have a better chance of placing the business then if you have a bankrupt client who already has a history of claims, but either way you will need loss runs as part of your submission.
  
  
• 4). Prepare an exceptional submission. When you find a broker or carrier that will at least consider your applicant you will need to submit a cover letter with your application explaining all the reasons why your client is a good risk. A good loss history will help. Additional positive aspects to point out may be alarm or security systems; well-trained business personnel; or a highly protected fire district.
  
  
• 5). Make a deal. You may have to barter with the broker to get coverage in place. Prepare your client for the fact that the insurance they request may not necessarily be available to them. In all likelihood you will receive a quote that has reduced coverage, such as "actual cash value" loss settlement, high deductibles or limited perils insured against. You can usually negotiate some of these items, but not always. If all else fails, ask the underwriter to issue a short-term three- or six-month policy, to be paid in advance by your client, until the bankruptcy proceedings are finished. This will ease the fears of some insurers who otherwise worry about payment.