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How to Get Cheap Car Insurance With No Deposit: 2021

If you want very cheap car insurance, no-deposit coverage is not something to pin your hopes on. In fact, there is no such thing as no-down-payment auto insurance or insurance without a deposit. No-money-down car insurance refers to a policy that allows you to pay monthly.

There is no such thing as "no-deposit auto insurance."

If you're looking for very cheap car insurance, no deposit is actually something to avoid because it could be a scam. However, you can find deals, if you compare car insurance rates and nab every discount you can find.

Here's everything you need to know about insurance deposits and payments.

What Is a Deposit?

When you sign up for car insurance or renew your car insurance policy, your new policy's coverage will not start until you make your deposit. This deposit is a down payment on your premium, which is the amount of money you must pay monthly or semi-annually for the agreed-upon amount of insurance coverage over a specified time period.

This down payment represents a part of your overall premium cost and goes toward paying off that total.

Why Do Car Insurance Companies Need a Down Payment?

Even cheap auto insurance companies require a down payment before your auto insurance policy takes effect. Auto insurance companies have several good reasons for demanding a down payment. First of all, no auto insurance carrier is going to guarantee you auto insurance coverage for the first month of your policy's term and then wait around for your first payment at the end of that month.

Down Payments Predict Responsible Drivers

Drivers who let their policies lapse to non-payment are knowingly driving without insurance, exposing not only other drivers but also themselves to risk and financial ruin. Such drivers are considered to be high-risk drivers, who pay higher insurance rates.

Auto insurers don't offer no-down-payment car insurance because a customer who cannot make an initial down payment is a customer who may not make future monthly payments. The auto insurance industry takes any lapse in coverage very seriously and will raise rates.

A Car Insurance Deposit Prevents Insurance Scams

Auto insurers demand down payments to prevent potential insurance scams. For example, a customer may get car insurance for a three-week road trip but then cancel his policy right before the first month's payment comes due. Another customer may want to get car insurance just to comply with her state's mandated insurance requirements, but once she has ticked off all the required boxes and is out on the road with her "instant insurance," she never ends up paying her premium. As you can see, a required down payment weeds out ill-intentioned drivers.

If an auto insurer doesn't ask for a deposit, that's a red flag.

How Is a Down Payment Paid?

Car insurance companies typically offer six-month or 12-month car insurance plans. Most auto insurers offer a range of down-payment options, from annually, semi-annually and quarterly to monthly payments. Here are the ways down payments are typically made:

Monthly Premiums

If you're paying your premium in monthly installments, your premium will be divided into monthly installments for the period of your policy's term, possibly with a small surcharge. The amount of the deposit, or down payment, is simply your first month's payment on a monthly payment plan.

Lump Sum, Quarterly and Semi-Annually

One way to avoid surcharges and fulfill the down payment requirement is to pay the entire yearly cost of car insurance upfront. Your insurer will reward you for doing so with a considerable discount.

Your insurer may also allow you to make payments quarterly or semi-annually; they may or may not add a surcharge.

How Much Is a Deposit?

If your insurance premium is $1,200 for one year of auto coverage, you will most likely be able to make a down payment of around $100. Some insurers may charge you a little more for that first payment, in part to cover the administrative costs associated with processing a new account. If your insurer takes this route, the balance that remains on your premium will be divided equally among the remaining months of your policy's coverage period. Some carriers will spread out the surcharge.

Other insurers may offer you a choice between paying for the first 30 days or the first 45 days of your policy, in which case the 30-day deposit will be the cheaper option. Of course, if you pay the entire $1,200 in one lump-sum payment, there is no chance your insurance will lapse within the time period of your policy's term and you'll be eligible for a discount between 10% and 20% of your annual policy.

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Beware of No-Deposit Car Insurance

If you are dealing with an insurance company that offers no-down-payment car insurance, you may well be dealing with a fraudulent or financially unstable carrier. In short, no reputable auto insurance company offers no-down-payment car insurance. The auto insurance industry has certain accepted, industry-wide standards and practices, but offering no-down-payment insurance is not one of them.

How To Get Cheap Car Insurance

The cheaper your auto insurance rate is, the lower your down payment will be. So how do you get cheap car insurance to get low-deposit car insurance?

Insurance carriers calculate auto insurance rates by looking at a number of known risk factors, including your age, gender, marital status, occupation, driving record, insurance history and, in some states, credit score, according to the Insurance Information Institute. But insurance carriers also look at the vehicle you are insuring: A car's age, make and model, its safety and anti-theft features and its annual mileage all play a part in determining how much you'll pay for your six-month or annual premium.

Lower your car insurance rates by comparing quotes when any of these risk factors change to your advantage. Most insurance providers will lower car insurance rates for any of the following events:

  • You get married.
  • You buy a house or move to a safer neighborhood.
  • You get a promotion.
  • You get a new job and your commuting mileage is cut in half.
  • You improve your credit score.
  • Your child moves out of the house or buys a vehicle of their own.
  • You buy a new car.
  • You have a milestone birthday.

Shop Around

If you're looking for affordable car insurance with low monthly payments, there is no substitute for shopping around. For one thing, the same car insurance company may give you one quote on Monday and a different quote on Friday. Savvy customers gather as much product information as they can and then look for the best deals for their money. With a little work, you can probably lower your monthly premium, which means lower monthly payments.

Don't Buy Too Much Auto Insurance

A primary factor in the cost of auto insurance is how much auto insurance you choose to buy. If you want the cheapest car insurance, you should purchase only your state's mandated minimum coverage and no add-on insurance products. Of course, if you are the at-fault driver in a catastrophic accident, you may regret buying the least amount of insurance possible.

Your deposit amount depends upon the cost of your auto coverage.

Raise Your Full Coverage Deductible

One way to reduce the monthly premium for full coverage—that is, comprehensive and collision— insurance is to raise your deductible, or the amount you must pay after a claim before your insurance kicks in. According to the Insurance Information Institute, increasing your collision and comprehensive deductibles to $500 from $200 could lower your cost by up to 30%. Further, choosing a $1,000 deductible may save you 40% or more on your policy.

Get Discounts

All car insurance providers offer discounts to customers, but not all insurers offer the same discounts. Here are some of the discounts that your insurance company may offer:

Cheaper Insurance=Lower Down Payment

No-down-payment auto insurance does not exist. Drivers are not making a "deposit" per se but merely paying their initial monthly premium on their payment plan before they start driving as an insured. Customers should be wary of a carrier that offers insurance with no deposit because it is out of step with the auto insurance industry's widely accepted best practices. There are other ways to save money on car insurance, like paying in full upfront.

You can also find a cheaper rate by using SmartFinancial's free auto insurance comparison service, which will match you with the cheapest car insurance from the best company in your area. To get started, just enter your zip code below and answer a few simple questions.

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