Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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The lowdown...

  • A down payment/deposit on an auto insurance policy may or may not be required
  • Credit checks play a role in how much of a down payment/deposit is asked of the new policy holder
  • Different states have different requirements related to deposits, coverage, and other rules

Buying an auto insurance policy is easy.

Searching online for quotes takes no real effort since user-friendly features allow for entering and submitting information without much difficult. Reviewing the resultant quotes doesn’t exactly require tremendous effort.

What may be difficult, for some, would be the necessity to pay a deposit on an auto insurance policy. A driver who is not able to pay a deposit does have the option of look for the appropriately titled “no deposit car insurance” policy.

Compare car insurance quotes and options by entering your zip code into our free rate tool. It’s free!

The Idea Behind a Deposit

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When quoted an insurance policy, the delivered price reflects the cost of a policy for a full year.

Paying the entire policy in full may be out of the financial reach of the average driver.

Since every state except for New Hampshire and Virginia require mandatory car insurance, auto providers cannot exactly refuse to be flexible when it comes to payment options for those seeking coverage.

Breaking payments into monthly installments can make a policy affordable for someone who is in need of coverage. Insurance companies do need to protect their own interests as well. They do so by asking for a deposit.

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A Deposit Equals a Down Payment

The problem with the word “deposit” is one of semantics. No one is putting a deposit down on the policy to secure it.

The idea that a deposit of $500 would be used to cover the $500 deductible might be what you think.

Such an assessment of what a deposit is intended to do is inaccurate.

Insurance companies pay out on insurance claims by collecting money from a large pool of customers. The money is then invested in various endeavors with the interest and returns being used to make payouts on claims.

Requesting a 10 to 40 percent down payment on a policy with a payment plan in place makes good business sense.

Various different factors could come into play when making requirements for a deposit. The deposit is what executes the policy and is, in essence, the first payment.

A 20 percent deposit on a $1,200 annual policy comes out to $240. The remaining balance is broken up over the term of the policy and could be paid the following ways:

  • annually
  • semi-annually
  • quarterly
  • monthly

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Credit Checks and Deposits

Car insurers are going to perform a credit check on the applicant. An applicant may not be turned down due to having bad credit, but premium rates may increase.

Deposits are probably going to be a bit higher for someone whose credit is poor. A person with poor credit appears as a fiscal risk.

Bad credit does not necessarily mean that a huge deposit is required. As always, reviewing as many quotes as possible is necessary in order to find the best terms.

No Deposit Car Insurance Providers

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While requesting a down payment/deposit makes good business sense for the insurance provider, so does offering a policy without any down payment.

Probably the easiest way to find a no deposit car insurance provider is to run a search of policy information with the criteria that no deposit is required.

Insurance providers that do wish to locate customers who may be overlooked by the other providers could be more than willing to provide a policy to someone who is unable to put forth a deposit.

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Rules for Deposits

Auto insurance policies are regulated by the laws of a specific state. This is why there are mandatory minimum coverage requirements in place based on the various states.

California, for example, requires a minimum of $5,000 for property damage. Anyone who runs a quote search online is going to look at the minimum and maximum coverage spread along with the related costs associated with such policies.

Not as clear would be the deposit requirements. The states may put in place mandatory maximum deposit requirements.

A Lowered Deposit

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A policy with no deposit requirements may be completely outside of the realm of consideration for certain applicants.

Based on their credit history and previous insurance history, a deposit may be required or the insurance company may have rules and policies in place that bar accepting a new policy without a deposit.

Perhaps the company has a sliding scale of the lowest down payment amount to the highest. Procuring a relatively low deposit may be possible making the policy much more accessible.

Look at the Coverage

Being required to pay a deposit or not being required to pay a deposit really shouldn’t be the most important criterion to focus on.

The key here is to acquire the best possible insurance policy that protects the financial security of the insured or anyone who may be injured in an accident.

Deposits and their amounts pale in importance to the ability to procure the best possible coverage for a driver.

Options do exist. If a deposit is a little high, perhaps a percentage of it or all of it could be paid with a credit card. The key here is to get the right coverage.

Comparison shop for the right coverage today by entering your zip code below.