How to Get a No Deposit Car Insurance Policy
If you Google the phrase “no deposit car insurance”, you’ll be greeted by roughly 13.8 million results. Those search results suggest just how important price is to auto insurance shoppers. For many, price is the most important factor in choosing a policy. So it’s no surprise that other commonly searched terms are variations of “cheap car insurance” and even “free car insurance.” Hey, it’s free to dream, right?
Getting car insurance without a deposit isn’t just a fantasy. It is possible to find insurers/policies which don’t require money down, but whether they are a legitimate option for you depends on a number of factors.
Payment Options Without Down Payments
Most car insurance companies offer several payment options, some of which eliminate the need for a down payment/deposit. For example, you could make a one-time payment in full to cover your premiums for the entire year. The advantages of paying in full are numerous. You avoid installment fees, which would otherwise cost up to $10 monthly. You can also rest easy knowing that your policy won’t lapse or be cancelled due to a missed or late payment. This is particularly valuable, as even a one-day lapse can cause your rates to triple and may also force you into a non-standard policy for high-risk insureds.
But let’s be real. If you’re looking for a policy without deposit requirements, you likely aren’t in a position to pay your entire premium in advance. In fact, most drivers pay their premiums over the term of the contract, in monthly installments. While convenient for most people’s budgets and for those wanting to maintain the ability to easily switch insurers, monthly payments have some drawbacks. For one, you’ll pay the aforementioned installment fee for the convenience of paying monthly. Additionally, if you do forego an initial deposit/down payment and opt for monthly installments, those installments will necessarily be higher, as you’re not taking that first ‘bite’ out of the total premium. Paying tomorrow and not today offers instant relief and might be easy, but larger monthly installments can be hard.
Which Insurers Don’t Require Down Payments for Auto Insurance?
Many insurers have now modified down payment and deposit requirements in an effort to accommodate and attract as many consumers as possible. Some well-known insurers who might let you slide without a down payment include:
- State Farm
- Safe Auto
- Liberty Mutual
- 21st Century Insurance
Sometimes Down Payments are Required
Although more insurers aren’t requiring large down payments, there are a couple snags you may run into even if you’re able to find a company that doesn’t require one. For example, some states simply require all drivers to make a down payment in order to purchase coverage. They are:
- New York
Your credit score may be another roadblock. Credit is almost always a factor in rating risk and calculating premiums, and has become so important it’s sometimes used as a basis to deny coverage completely. Your poor credit may force you into a risk tier where down payments aren’t optional. Most insurers catering to those with poor credit, or to those deemed ‘high risk’ – like young drivers or those with multiple accidents or traffic violations – require down payments of one or two months’ worth of premium.
What to Do if a Down Payment is Required
Perhaps the best way to offset the cost of a down payment is to search for cheaper premiums. It won’t help you come up with the cash, but a cheaper policy should come with a proportionally lower deposit requirement. Consider the following strategies:
Consider carrying just liability coverage until you can afford other optional coverages. All but two states requires you to carry a minimum amount of liability coverage, which protects third parties if they’re injured or if their property is damaged in an accident you cause. Just remember that liability-only coverage means there’s no coverage on your vehicle. To protect your vehicle, you need comprehensive and collision coverage, also known as full coverage. This is why liability-only coverage is significantly cheaper. Rates vary drastically depending on the policy and the driver; but as an example, you might pay $100 monthly for full coverage, whereas liability-only might cost only $40. Forgoing full coverage isn’t ideal, but at least you’ll be driving.
If you do opt for liability-only coverage, choose the highest liability limits you can afford. Higher liability limits will mean discounts in the long-run. Insurers reward drivers who opt for higher liability limits, a choice they see as financially responsible.
Look for discounts. Most insurers offer a standard array of valuable discounts, such as multi-policy discounts, good student discounts, or affinity discounts. Some can save you up to 10%.
Arrange for your monthly payments to be made by automatic electronic funds transfer (EFT). Using a preferred payment method like this will help you avoid installment fees of $5 to $10 per month.
Whether a down payment is required or not, always compare several quotes using the same coverage options, and research insurers before buying policies. You can do the following easily online:
- Check an insurer’s financial stability and reputation through A.M. Best, Standard & Poors, or Moody’s Investor Service.
- Research insurer complaint statistics through your state’s department of insurance, which you can find through the National Association of Insurance Commissioners (NAIC).
- Review consumer feedback regarding insurers via the Better Business Bureau.
If you have difficulty finding a no-deposit policy, don’t let it get you down. And don’t skip coverage just because of what you have to pay today: If something happens and you don’t have insurance, the financial devastation will be far worse than several hundred dollars of down payment.