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You may have seen some ads promoting low or no down payment car insurance. Some claim you can get coverage with a $20 down payment — but it's usually more complicated than that, and you generally shouldn't trust this type of offer.
Most insurance companies require you to pay at least your first month's premium when setting up a new policy as a down payment. A car insurance down payment secures your coverage if you can't afford to pay your full annual premium, because an insurer won't be willing to cover you without some assurance you can pay. Insurance companies use deposits to help verify your legitimacy and check that you have a working payment method.
Because your down payment is often one monthly premium, $20 usually just isn't enough to cut it. Companies that advertise such cheap car insurance often obscure heavy restrictions about who qualifies and what type of insurance coverage you'd get. However, there are ways to reduce your down payment, and we'll cover what these are and what factors influence the amount you need to deposit to get car insurance in the first place.
How much is a normal car insurance down payment?
Your down payment for car insurance is often a percentage of your total premium. If you plan to break up your premium into monthly rather than annual installments, you may be required to pay a percentage of your first month's bill (usually either 50% or 100%).
There are no official limits on insurance down payments, and a car insurance company can ask for two months or more worth of payments upfront before your coverage takes effect.
If you've got some money in the bank, many insurance companies also offer the option to pay your entire six-month or annual premium upfront for a discount.
The exact deposit amount and the cost of your monthly insurance payment will depend on your coverage and other factors such as your credit history, so make sure to consider multiple car insurance companies if you're thinking about switching.
Can you get car insurance with a $20 down payment?
In short, probably not. The cheaper your car insurance premium, the less expensive your down payment (usually). But even cheap auto insurance down payments usually cost more than $20. You may find that only drivers who want the state-minimum required insurance coverage, and who have perfect driving records and credit histories, are eligible for the lowest down payments.
If you need more than minimum coverage (as most people do), or if you have some marks on your driving record, you'll probably have to pay a higher down payment than $20.
Learn more: Cheap Car Insurance With No Deposit? No Such Thing
Factors that influence your down payment
Many factors are used to decide your auto insurance rates, including:
- Your driving record
- How much you use your car
- Where you live and work
- The type and amount of coverage you need
- The kind of car you drive and how much it's worth
- Your age
- Your gender
- How you use your car (commuting, pleasure driving, etc.)
- Your credit history
Even if you are an ideal candidate with a perfect driving history, a high credit score, and a less-expensive car, it's unlikely that you will only have to pay $20 for your car insurance down payment. Sometimes, even state regulations can prevent you from getting a low down payment option.
If you drive a high-value vehicle, don't have insurance or credit history, or are a new driver, then you probably won't be able to find a low down payment option — much less one that costs only $20.
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Six ways to reduce your auto insurance down payment
To get the lowest down payment possible, you'll want to make sure you're receiving the best car insurance rate possible. There are many different ways you can try and get lower rates on your car insurance. Here are six of them:
1. Decrease your coverage
Depending on the value of your car and its age, you may be able to decrease the amount of collision or comprehensive coverage you carry.
Although nearly all states require you to maintain certain levels of liability coverage, as your car ages, you can start to remove optional full coverage options. According to the Insurance Information Institute (III), if your premium costs more than 10 times the worth of your car, it's probably not your most cost-effective option.
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2. Increase your deductible
Increasing your deductible, which is the amount you pay before insurance kicks in after an accident, could save you some serious money on your premiums.
Even increasing your deductible from $200 to $500 could reduce your collision and comprehensive coverage costs by 15% to 30%, according to the III. Going to a $1,000 deductible might save you 40% or more.
You should know that if you raise the deductible, you need to make sure you have that same amount of money set aside in a savings account. You'll need to pay that cash upfront before your insurance takes over in the case of an accident.
3. Compare different insurance providers
Pricing can vary from one company to another, so make sure to compare multiple auto insurance quotes and coverage offerings before settling on a policy. It's easy to get a free quote from multiple auto insurance companies online, including big names such as Progressive, Geico, Allstate, and State Farm.
Before you commit to an auto insurance policy, check on the company's financial health, customer service reviews, and claims process.
4. Ask for premium discounts
Most insurance companies offer various discounts on their policies. Insurance discounts are available for things such as being a safe driver, having good credit, or bundling multiple insurance policies together (such as home and auto insurance).
Even driving fewer miles than the average person could qualify you for a discount. Ask your insurance provider directly if there are any additional discounts you may qualify for, or check the company's website for discount details.
5. Keep a clean driving record
Your insurance rates tend to go up after you've been in a car accident, but they can also increase if you get speeding tickets or other moving violations within the span of a few years. Do your best to keep your driving record clean to be eligible for the best rates available.
6. Increase your credit score
Along with a clean driving record, a solid credit score can help you keep your insurance rates low. Most insurance companies use credit scores to help determine your auto rates. To improve your credit score, make loan and credit card payments on time and keep your credit utilization rate under 30%.
FAQs
Is car insurance cheaper if you pay upfront?
Usually, yes. It's often cheaper if you pay your entire premium for a six- or 12-month policy upfront because some insurance companies offer a discount if you pay all at once.
If you're a new customer, the insurance company may waive its down payment requirement completely if you pay your entire annual premium before your new policy goes into effect.
Do I have to pay a deposit for car insurance?
Yes, all car insurance companies require some sort of deposit or down payment. No-deposit car insurance ads are often misleading. Most insurance companies require you to pay the amount of one monthly payment before coverage begins. Some companies require even more than that.
If you don't have any credit or car insurance history, or if you have bad credit, you may be required to put up additional money as part of your deposit or down payment.
Bottom line
Although a $20 down payment is technically possible, it's far from probable, and most insurance companies don't offer it. Even when insurance companies do have down payments that low, they're usually only offered to a few customers who meet several criteria.
Even if you can't get a $20 down payment, check out our tips to save money on car insurance and research the factors that affect car insurance rates to make sure you get a good price on your new policy.
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