How can I get no-deposit car insurance?

The term is misleading for one main reason: it doesn’t exist. But you can get coverage with a low deposit.

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Sifting through providers and policies can be confusing, especially when you see terms like “no deposit car insurance” being bandied about.

Car insurance is a legal contract — and the truth is, you’ll always need to pay something upfront. When you see ‘no down payment,’ it just means you won’t be paying more than the first month’s coverage for your policy to take effect.

If no-deposit car insurance is a myth, can I at least get a low deposit?

Yes, and here’s how it works: When you purchase a car insurance policy, you have the option to pay in full or in installments. Paying in installments allows for you to split the cost of your coverage across 12 monthly payments. The first payment is sometimes more expensive if it includes the deposit or down payment. The word “deposit” is misleading too, as you won’t get it back when your term ends.

Typically, drivers with clean driving records and high credit scores can qualify for low-deposit insurance. Often, the deposit is as little as a few dollars and it helps to cover the admin costs that come with taking on a new customer.

Either way, you’ll always need to pay something to secure coverage. Once you pay the first month’s premium, your policy starts.

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How can I lower my upfront payment?

If you want to lower your upfront payment, you have three options:

  1. Opt for a monthly payment plan with a low deposit. By choosing to pay in installments, you’ll only need to pay the first month’s premium to initiate your policy. Typically, the deposit is built into that first payment, and is only a few dollars if you have a clean driving record. According to our research, for example, Progressive charges a $4 deposit. Geico’s was a little higher at $5.
  2. Go for pay-per-mile insurance. If you sign up for pay-per-mile insurance, you’ll simply pay the first month’s base rate. This acts as your “security deposit.” At the end of the monthly billing cycle, you’ll pay the next month’s base rate, plus the cost of any miles you drove over the previous month. The base rate varies between providers and policies.
  3. Look for providers offering a lower first month’s payment. From time to time, insurers will slash the cost of coverage for the first month. This usually applies to safe or loyal drivers. Major providers like State Farm and Allstate aren’t currently offering this deal, but double-check when you’re ready to purchase a policy.

What about those agencies claiming to offer no-deposit car insurance?

When you look up “no-deposit car insurance”, you’ll see a bunch of third party insurance agencies pop up. Question the validity and integrity of these sites — the fact is that no reputable insurance provider issues a policy without some payment up front.

Insurance is a game of risk. From an insurer’s point of view, someone who doesn’t want to pay a deposit is probably only purchasing a policy to either satisfy a car dealership’s requirements or trying to avoid registration penalties. And chances are, they’ll cancel their coverage soon.

Who can’t get low deposit car insurance?

If these situations apply to you, you may have a harder time finding coverage with a low down payment:

  • You have a poor credit history.
  • You have blips on your driving record in the past three to five years.
  • You need SR-22 insurance.
  • You own a new, expensive, exotic or luxury car.
  • You’re a new driver.

Insurers deem these situations risky, so they compensate for that risk by charging a higher rate. If your credit, driving record or license suspension is making it difficult for you to get coverage, it’s worth looking into car insurance for high-risk drivers. Otherwise, you may have to make a larger down payment or pay for your policy in full.

How can I get the cheapest car insurance?

Searching for the cheapest possible coverage? These strategies help you to save on your insurance.

  • Compare rates by total annual cost. Don’t just look at the deposit amount. Assess the annual rate so you know exactly how much money you’ll be forking over.
  • Watch out for deals that seem too good to be true. For example, some of the first month free deals actually split the cost of all 12 months across your policy premiums, so you end up paying for that first month in small increments throughout the year.
  • Change to annual payments. When you can afford to pay upfront, opt out of the monthly payment plan. You’ll save more over the life of the policy.
  • Sharpen your safe driving skills. Sign up for a defensive driving course to score a safe driver discount and try to keep tickets and claims to a minimum. Improving your driving record could also make it easier to qualify for a lower deposit the next time you switch.
  • Opt for pay-per-mile insurance if you don’t drive much. That way, you’ll only pay for the miles you drive.
  • Look into a black box policy. A telematics device or driving app like Progressive’s Snapshot records your speed and distance traveled and monitors braking and cornering. If you’re a good driver, you’ll typically earn a discount.
  • Explore other discounts. Ask your insurer about discounts for going paperless, taking out multiple policies and paying by automatic bank transfer. Combine these with safety, defensive driving and anti-theft discounts and you could save up to 30% to 50% if you qualify.
  • Shop around for a better rate. Switch car insurers or compare quotes every year, especially if you got married, moved or experienced another big life change.

Is car insurance with a low down payment worth it?

It depends on your driving profile and budget. While monthly payments can make paying for a policy more manageable, that convenience comes at a cost. Since it takes more time to process 12 payments instead of one, most insurers charge an installment fee, which can be up to $10 per month. If you can afford to pay upfront, you’ll typically save 5% to 10% on your insurance.

If you have good credit and a strong driving history, or if you drive an older or less expensive car, you can probably buy a policy with a low deposit. On the other hand, if you have poor credit or blemishes on your driving record, you may face a higher upfront payment.

How do I apply for low deposit car insurance?

The application process to buy car insurance is basically the same for all payment options. First, you’ll get a quote, then you’ll fill out the application. The difference comes when you get to the payment page, where you’ll be able to opt into paying in monthly instalments.

  1. Compare quotes. Premiums vary between providers, so compare a few to get the best possible deal. To get an accurate quote, specify the type and amount of coverage you want (e.g. comprehensive) and enter details about your car, how you drive, where you drive and who else will be driving. Then, opt into policy extras and adjust your deductible if you wish.
  2. Apply for your chosen insurer. The application asks for the same information, but in more detail. Select the date you want your policy to start. You’ll then reach the payment options.
  3. Make your first payment. Enter your payment information to secure your policy. Once your insurer approves it, you’ll receive a confirmation and your coverage will come into effect on the date you specified.

Bottom line

No-deposit insurance doesn’t exist, and for good reason. Insurers use down payments to cover onboarding costs and to make sure you’re not going to cancel your coverage right away. However, low deposit insurance is a thing, and you can often find it if you’re a good driver with a good credit history.

There are other ways to save, like looking for discounts and only paying for the coverage you need. To score the best rate, be sure to compare car insurance quotes.

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