No Deposit Car Insurance
No deposit car insurance: the facts
When you’re taking out a new car insurance policy you will usually be given the option to either pay for the full year upfront or pay it off on a monthly basis.
If you opt for the monthly payment plan you’ll often be required to pay a lump sum when you first sign up, and since this down payment can sometimes amount to 20% of the premium it can be a painful pill to swallow if your premium is high or your cashflow is low.
Unfortunately, the theory that you can avoid this initial outlay by taking out ‘no deposit car insurance’ is a myth. Whether you opt to pay for your car insurance policy on an annual basis, or you decide to plump for the monthly payment plan even though it might cost a little more overall, you’ll usually be required to make a payment when you’re signing up for the policy – the full amount, in the case of an annual policy, or the first month’s payment in the case of a monthly plan.
Many insurance companies structure their monthly payments in such a way that this initial upfront amount is significantly larger than the amount you’ll pay in subsequent months, but there are a few providers that divide the repayments into twelve equal amounts.
So while you aren’t ever likely to find ‘no deposit car insurance’, if you compare quotes from a wide range of insurance providers you might just find one that offers a lower upfront payment.
If no deposit car insurance is a myth where did the notion come from?
In the past some insurance providers advertised their car insurance policies as ‘no deposit’, which was particularly appealing to student drivers or provisional licence holders, who may have been struggling to get to grips with the high cost of car insurance for young drivers.
While a few of these advertisements may have been unclear about this fact, the policyholder would usually see the initial amount debited from their account within a matter of days if they weren’t required to pay it at the time they were signing up for the insurance policy.
I’ve been offered no deposit car insurance – is it a scam?
If you’ve been offered a car insurance policy on a monthly payment plan and you aren’t required to make an initial payment by debit card you should double check the small print to find out when the first payment is due…you could discover that it will be taken from your account just a few days after you sign up for the policy, and in some cases that first payment might be much larger than the subsequent payments.
Is ‘low deposit car insurance’ also a myth?
No, some insurance providers are willing to split their monthly repayments into 12 equal amounts rather than charging a larger lump sum upfront. If you decided to go with one of those providers, and your total premium was the same, then you’d be benefiting from a lower initial payment when you’re taking out the policy.
What else can I do to find cheaper car insurance?
If you’re a young driver and you’re being quoted thousands of pounds for your car insurance you may have no option but to agree to a monthly payment plan – few people have £4,000 or £5,000 in cash available upfront, particularly someone aged 17 to 21.
Beyond a payment plan, though, there are a few other things you can do to help reduce the cost of your insurance. For starters, you could:
- Opt for a car with a smaller engine, which usually means it will fall into a cheaper insurance group
- Consider taking out telematics insurance (or black box insurance, as it’s often called), which involves installing a device in your car to track your driving habits. This type of cover can sometimes reduce your premium by as much as 20%
- Consider opting for third party or third party, fire and theft insurance, which is sometimes a little cheaper than fully-comp
- Consider taking the ‘Pass Plus’ or ‘RoSPA Advanced Drivers and Riders’ test, which can help to demonstrate that you’re a safety-conscious motorist.