Some auto insurance carriers will expect you to pay a large deposit upfront before the policy becomes active. As car insurance is already expensive, being able to pay such a large deposit all at once could be financially daunting. However, some exceptions to this rule and alternatives can help drivers strapped for cash. Some insurers have zero down auto insurance policies that can get a driver covered with minimal upfront costs.
These policies appeal to those who don’t want to (or cannot) pay an entire annual premium all at once. However, it is still important to understand that you will need to make monthly installment payments with a first month free car insurance plan.
How Does Zero Down Coverage Work?
Simply purchasing auto insurance without an initial down payment does not mean that the coverage begins before the initial money is paid. Your auto insurance coverage won’t become binding until payment is made.
It means that your only initial payment will be that for the first month. So, you will be saving money upfront on a month-to-month basis, but it will ultimately cost you more than if you paid the entire premium at once with one payment. Many people like zero down car insurance policies because it lets them break the cost of insuring their vehicle into low installment payments.
Get a Policy with a Zero Down Deposit
While an insurance company offers diverse payments, there is not necessarily an option for everybody. A no down payment policy could be offered to a customer with a cheaper, older vehicle, but not often for drivers insuring new and expensive vehicles.
New automobiles are a riskier insurance investment and normally require larger deposits. Insurance companies are also unlikely to offer this option to someone with a poor credit history or drivers who need to apply for an SR-22.
Qualify for Discounts and Save More
You may be able to save a good amount of money on your policy if you happen to qualify for one or more discounts that insurers offer customers to help them save more. Popular discounts include safe driver, low mileage, bundling home and auto, good student, military, and teacher.
Because there are many factors that go into evaluating auto insurance rates, there is no one singular “cheapest” option for car insurance. Someone living in one state may get a lower rate than someone living in another. Two people living on the same street could get vastly different rates from the same insurer if one has a driving record with a DUI or other serious infractions, while the other driver does not.
If you have a good credit score but your neighbor or friend does not, you will likely get a better rate than they do. If your vehicle is newer and more expensive, your rates will be higher than those of someone whose vehicle is worth a lot less.
Why Companies Ask for Down Payments
Auto insurance companies are often reluctant of clients who are looking for no deposit car insurance policies. The consensus from their perspective is negative. Providers feel this might be an attempt to acquire insurance for free or get covered for a month or two, then cancel the policy. The insurer needs to make sure that the customer does not reverse-course shortly after the purchase and cancel the policy.
Customers who make deposits are less likely to cancel their policy. This is why carriers want deposits upfront. It allows the insurer to obtain at least a portion of the policy payment. This is not a supplemental charge to the policy. It is simply a portion of the premium that is deducted from the full annual sum.
The down payment drives the monthly insurance charges going forward and makes the ensuing monthly installments less each month. The size of the down payment varies from one insurer to another, and some even let the customer choose what they are comfortable with for a down payment.
Typically, down payments range from 10% to 30% and even higher in some cases. Those who pay the full premium in advance typically get rewarded with a small discount of 2% to 3% of the overall cost of the premium.
Avoid These Mistakes and Save More Money
If you do not have the financial means to purchase car insurance, you should not drive. If there is an accident and you are at fault, you will be responsible for all the expenses involved in the other driver’s car, as well as any medical or legal fees that you incur as a result of it. If you do not pay your premiums, your insurance will be voided. This will lead to other problems, including the suspension of your driver’s license and expensive fines.
You can fill out an SR-22 form as well. Suppose you come to a point where your financial situation allows you to afford to get car insurance again. In that case, your coverage can be denied, or you could be charged significantly higher rates due to your previous policy lapse. The insurer would do this to make sure that you cost them less money if you were to drop the coverage again.
How Are Rates Determined?
Many factors are considered by auto insurance providers when determining a customer’s premium. Some of the main factors are a driver’s age, annual miles that are driven, vehicle type, zip code, credit score, homeowner or renter, and credit score.
Each insurer has a different algorithm for calculating rates. This is why it’s important to compare several rates for the type of coverage needed.
Thieves often target older, cheaper cars to steal as they are easy to hack and sell for parts. Newer cars might also be likely candidates for theft, but many have sophisticated security systems, making them more difficult to steal. Vehicles with a higher chance of auto theft occurring will cost more to insure.
The reason insurers consider the zip code is that you may live in an area that has either a high accident rate or an above-average car theft rate. A zip code is an important metric used to calculate risk for the insurer.
How to Find Affordable Auto Insurance?
First, you need to figure out the coverage you are looking for, and the limit amounts you need. You can start your search online with comparison websites. It’s smart to get quotes from local carriers and national insurers to increase your chance of finding the best rates.
Many online insurers have direct rates that can save you hundreds per year. It’s smart to compare at least ten quotes before buying a policy. Check the insurer’s financial strength before buying a policy and also customer reviews.
Now that you know how to find affordable car insurance, get a quote and start comparing rates. Please use the free tool at Traders Insurance.