When you sign up for car insurance with monthly premium payments, you usually have to pay a little more for your first payment than you do in payments over the remaining months of the policy. This first payment includes your first-month premium plus additional fees. Those extra fees are sometimes considered a deposit or down payment.
Some insurance companies try to entice new customers by claiming they offer cheap car insurance with no deposits required. However, buyers should beware of these claims because no reputable car insurance company would give you car insurance without getting at least some money upfront.
Let’s look a little closer at what car insurance deposits entail, what the extra money is for, and how you can save money on car insurance premiums.
Can you get cheap car insurance with no deposit?
Insurance companies often require customers to pay a deposit or down payment with their first premium payment when they sign up for a car insurance plan. This cost is usually a percentage of your total premium.
A deposit on your car insurance isn’t like a deposit you would pay when you sign a lease to rent your home. It isn’t an additional fee that you will get back. Instead, your car insurance deposit is built into the total cost of your car insurance premium. Once you pay that cost upfront, the deposit reduces your monthly premium payments over the remaining months of the policy. So the higher your deposit is in your first payment, the less your premium payments will be over the remaining months of your policy.
Sometimes, the deposit or down payment won’t be charged in your first premium payment but spread out throughout your monthly payments. The auto insurance company may even offer you a lower price for your first payment, but that cost will be made up in higher premium costs over the remaining months.
For example, this six-month car insurance policy with Progressive costs $323. If you are paying monthly on this policy, your payments should be about $53.83 per month. However, Progressive offers you the option of paying less ($23.57) on your initial payment, so your remaining payments will be higher ($59.89). Either way, you would still be paying $323 for a six-month policy.
You won’t find many insurance providers offering zero-deposit car insurance because the insurer wants some money down if it is going to take on the risk of providing you with an auto insurance policy.
If it's important to you that your car insurance premiums have low down payments or no deposits or down payments, then you may need to shop around to find the best cheap car insurance policy to fit your needs. This likely means getting multiple car insurance quotes.
WarningAvoid those insurers offering a car insurance policy for no money down. If it sounds too good to be true, it probably is.
How car insurance payments work
Typically, you have two ways to pay your car insurance: monthly or in full as a lump sum. Monthly payments might be easier on your budget but will cost you more. Paying a six-month car insurance policy in full is always cheaper than paying in monthly installments. In the Progressive example above, you would save $33 on your car insurance by paying your semi-annual premium in full rather than monthly.
In another example, car insurance coverage from Geico could cost you $405.74 if you pay the six-month policy in full. But if you opt for a monthly payment plan, your total cost will be closer to $430. With this Geico quote, your first payment would be larger because it includes the deposit or down payment. Paying your car insurance in full may also be a good way to get cheaper insurance without much of a deposit.
How to save money on auto insurance
There are other ways to save money on your car insurance than low or no deposits. Insurance companies base their costs for car insurance on risk. High-risk drivers usually have to pay higher insurance premiums than those regarded as low risk. Several factors are considered when determining a driver’s risk level, such as driving history, credit score, and location.
Here are a few steps you can take to save money on car insurance.
Get multiple quotes
When looking for car insurance, shop around to find the best price for the best coverage you can get. The cost of car insurance premiums can vary from one insurance company to the next, so don’t go with the first auto insurance quote you get.
TipIf getting multiple quotes sounds daunting, consider finding an independent insurance agent. These agents work with multiple companies and can help you find the best rates on coverage.
Boost your credit
In all but three states, insurance companies can use your credit score as a determining factor for the cost of car insurance. Drivers with lower credit scores are considered a higher risk and therefore have to pay more for their car insurance. Meanwhile, drivers with higher credit scores can take advantage of lower premiums for car insurance.
Boosting your credit score can help you save money on car insurance. Credit scores of 670 to 739 are considered good, 740 to 799 is very good, and anything over 800 is excellent.
TipAs of September 2022, the use of credit scores as a factor in determining car insurance premiums is prohibited in California, Hawaii, and Massachusetts.
Qualify for discounts
Most car insurance providers offer discounts that policyholders can take advantage of to lower the cost of their car insurance. Some possible discounts include:
- Safe driver
- Good student
- Multi-policy (bundling)
- Vehicle safety features
- Defensive driving course completion
Maintain a clean driving record
One of the best ways to save money on your car insurance is by maintaining a clean driving record. Many insurers offer considerable discounts to drivers who haven’t had any traffic violations or accidents within at least three years.
Some insurers, such as Progressive, GEICO, Allstate, and Liberty Mutual, offer accident forgiveness to policyholders with good driving records. With accident forgiveness, the insurance company agrees to “forgive” an accident and, therefore, not to increase your insurance rates if you haven’t had an accident or violation within at least three years.
You can lower your car insurance premiums by adjusting your coverage options. Almost all U.S. states require drivers to carry some level of bodily injury liability and property damage liability insurance. The cheapest car insurance you can get would be a bare-bones policy that provides you with enough coverage to meet the minimums required by the state you live in.
However, it’s a good idea to have more car insurance coverage if you can afford it to protect you if you are in an accident. Sometimes referred to as full coverage, collision and comprehensive insurance help pay for repairs or replacement of your vehicle after an accident, regardless of fault.
Although not required by state laws, collision and comprehensive insurance are sometimes required of drivers who lease or are still making payments on their vehicles. Dropping collision and comprehensive car insurance coverage could save you money on your premiums but cost you more in the long run if you’re stuck paying for repairs out of pocket.
Consider not filing for small claims.
Every time you file a claim with your insurance company, you run the risk of having your insurance premiums increased. If you are in a minor accident, you may save some money by not filing a claim with your insurance, especially if you were at fault in the accident. An at-fault accident can increase your car insurance premiums by 20% to 40%.
Instead, you could offer to pay out-of-pocket for the repairs on the other driver's vehicle, thus avoiding filing a claim with your insurance company. If you choose this route, you still need to file a police report.
Which company has the lowest car insurance?
The insurer with the lowest auto insurance rates depends less on the company and more on what state you live in. For example, if you live in Wisconsin, your car insurance will be more affordable than in Florida.
The cost of car insurance also depends on other factors besides your home state and insurance company. Your credit score and driving record also play a part in determining your cost of car insurance.
How do you get cheap car insurance?
The best way to get cheap auto insurance is to shop around the different car insurance companies to find the best deal. Each insurance company offers various discounts that policyholders can take advantage of to lower their premiums. Another way to reduce car insurance costs is to pay your six-month premium in full rather than monthly.
What is the cheapest way to insure a car?
The cheapest way to insure a car is to get a bare-bones policy for the minimum liability insurance coverage required by your state laws. If you have an old car that is worth only a few thousand dollars and you don’t drive it a lot, this bare-bones car insurance policy may be sufficient.
However, if you have a newer car that has a higher value, you may want to opt for more coverage on your car insurance policy and include collision and comprehensive coverages. You could opt for a higher deductible or lower limits to keep costs down.
If you are looking for no-down-payment car insurance, you probably aren’t going to find it. Most of the best car insurance companies require you to make an upfront payment for auto insurance coverage. You should be wary of believing an insurer that promises to provide a policy for zero money down.
A deposit on your car insurance isn’t really an additional fee. It’s built into your monthly rate, so you will be paying it one way or another, whether it is in a higher first-month payment or if it is spread out over your six-month policy.
There are plenty of other ways to save money on car insurance instead of avoiding the down payment. Some options for getting affordable car insurance include keeping your driving record clean, changing the types of insurance you have on your car, building your credit score up, and shopping around for the best car insurance rate that fits your needs.
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