Does Auto Insurance Require a Deposit?
You might have seen auto insurance advertisements that claim that you can get a policy with $0 down at the time you buy. Don’t let this ruse fool you. It does not mean that you won’t pay anything at the time you enroll; it just means that you might be able to hold off on paying a portion of your premium until later. However, is this what you should do?
Often, by paying a down payment for your auto insurance, you will be able to receive a more affordable payment plan for the rest of your policy term. Therefore, for a bit more of an investment at the beginning, you might be able to save in the long run. Let’s take a closer look at the benefits of paying a down payment for your plan.
Why Do You Face Down Payments?
Some people choose to pay their entire auto insurance premium at the time they buy their policy. Others, however, opt to break their premium into payments that they make monthly or at other regular intervals. Therefore, at the time you enroll in your coverage, you will have to pay both your first premium, and a separate down payment.
A down payment is not a separate fee levied by your insurer. Instead, it is a portion of your premium that you pay in advance of your monthly payments, and which will lessen these payments as a result. Insurers often institute these requirements because they want to ensure that they can assume the financial risk of covering you from the time you enroll in benefits. The additional investment of your down payment will make certain that they can do so.
The perk of paying a down payment is that it will lower your overall premium bill moving forward. It is not a discount. Rather, it is a portion of the premium that you get out of the way at the start of your policy. Therefore, the following premium payments will be lower overall than your first payment, which can be a big relief to your household budget.
Should You Pay in Full, Instead?
If you feel that you don’t want to pay both a down payment and the continuing premium bills, you could opt to pay your premium in-full at the time you enroll in coverage. If you choose this option, then you won’t have to pay again until your policy renews. Some insurers will offer you a discount if you choose this option, to boot.
However, paying in full means you will have to pay a very large bill at once, and if you can’t afford this cost, then it is best not to take risk. Your auto insurer is happy to work with you to determine a payment plan that is best for you. Plus, you can still qualify for other discounts that will help you continue to receive your benefits affordably.