Does Auto Insurance Require a Deposit?
Some insurance companies require drivers to make a deposit when purchasing auto insurance. Not all do this, though. It is important to discuss the need for a deposit with your insurer before agreeing to the terms. There are a few key things to remember about this policy and what the deposit means.
Why Do You Face Deposits?
Some car insurance companies require a deposit at the time of securing a new policy for a driver. The deposit may range from 10 to 25 percent of the premium cost.
This often occurs when the driver is new to the company. If the driver has a poor credit score, they may also require it. The most common time for this to occur is if you do not pay for the entire cost of your premiums upfront.
Should You Pay in Full?
Some auto insurers provide discounts for those who pay for their policy all at one time. For example, the company may provide you with a discount if you make payment in full at the time of agreeing to the policy. Most policies span six months. The discount amount can differ significantly as well.
However, if you cannot pay for the policy in full upfront, talk to the company. Many allow you to make payments. If you cannot make a deposit amount, let the agent know this, too. Many will work closely with you to make it affordable for you.
What Does the Deposit Pay for Then?
The deposit is simply a portion of the total premium cost. If your policy for six months is $500, the company may require you to make a deposit of $50 or $100. This comes off the top. The policy’s monthly price, then, is the remainder divided by the remainder of the term. The insurer does not hold the deposit until the end of the payment term. Rather, you pay this to start the policy. However, be sure to ask about fees, too. Many auto insurance providers charge a fee for payments.
Having proper auto insurance is critical. Paying for it does not have to be a challenge. Most companies will work closely with you to find the right balance for your needs. Be sure to ask your agent about any discounts available to you for paying the full balance off at one time as well. This may save you a substantial amount.