Can you buy car insurance without a large deposit upfront?
If you want to find car insurance with a low (or even no) deposit, lower deposit, lowest possible deposit you are not alone. According to gocompare.com 52% of UK drivers prefer to pay monthly for their policies, rather than find a large upfront sum.
Some insurers have adopted a low deposit scheme. You have to pay something in advance (that's the law) which varies from 1/12th of the premium upwards, then you repay the rest monthly by credit card. Those who buy their cover in this way are not limited to the lower paid, students, or those who are generally hard up; many monthly paid people prefer to do it in this way as it helps them to keep a firm hold on their finances. Like all systems however this one has advantages and disadvantages, a few of which are as follows: –
Some insurers have adopted a low deposit scheme. You have to pay something in advance (that's the law) which varies from 1/12th of the premium upwards, then you repay the rest monthly by credit card. Those who buy their cover in this way are not limited to the lower paid, students, or those who are generally hard up; many monthly paid people prefer to do it in this way as it helps them to keep a firm hold on their finances. Like all systems however this one has advantages and disadvantages, a few of which are as follows: –
There are advantages for you ...
It can help with your budgeting. You not only don't have to pay for all your insurance upfront, but you don't even have to pay your deposit for a while yet, depending upon when your credit card payments are due. If you're not short of money it means that you can keep it in your pocket, and if you are it means that you can have your insurance today and not in the distant future when you've saved up the huge premium that it's going to cost you.
But there are disadvantages too!
The main disadvantage is that it can cost you more than it would if you had paid everything upfront. The reason for this is twofold; the first is that the insurance companies are aware that a small number of people who take out an insurance contract involving monthly repayments do not in fact complete those payments; a very unwise thing to do as I will explain later.
Secondly, the way that insurance companies make a large proportion of their income is by investing money that they take in as premiums on stocks, shares, government bonds and any other securities that they feel they can make a profit on. If your money only comes in in drips and drabs rather than as one upfront payment they will have far less of your cash available to them at any time, so their investment income will be less. The insurers need to cover the cost of this, so it is sometimes loaded onto those who pay monthly.
The second disadvantage is that several of the best value insurers don't accept monthly payment plans. This means that you could lose out on the best bargains.
Secondly, the way that insurance companies make a large proportion of their income is by investing money that they take in as premiums on stocks, shares, government bonds and any other securities that they feel they can make a profit on. If your money only comes in in drips and drabs rather than as one upfront payment they will have far less of your cash available to them at any time, so their investment income will be less. The insurers need to cover the cost of this, so it is sometimes loaded onto those who pay monthly.
The second disadvantage is that several of the best value insurers don't accept monthly payment plans. This means that you could lose out on the best bargains.
Are there no special offers?
Car insurance, despite the enormous costs involved to the consumer, is still a highly competitive business and there is a huge market in people who wish to pay monthly. Insurers are eager to secure this business because once they have a client on their books buying car insurance, they can also sell home insurance, life cover, business policies, and all other forms of insurance that they can make a good profit on, to a high proportion of them.
A lot of them are therefore quite prepared to subsidise the extra problems involved in accepting monthly repayments as part of the cost of growing their businesses. Periodically some of them may have special offers for zero deposit insurance including interest-free repayments and even special online discounts. This of course would be no use to you whatsoever if the special offer cropped up before or after you wished to buy your insurance so the only way to make sure of getting the best deal at the time is to take a look at very many offers simultaneously and then select the best deal available; in other words start your search early.
Insurers usually allow you to reserve an offer for 30 days for your renewal is due, so start looking for your next policy around this time. Research suggests that this is the cheapest time to buy your cover, anyway; insurers tend to smile on people they view as well organised, but are not so impressed by those who do things at the last minute.
A lot of them are therefore quite prepared to subsidise the extra problems involved in accepting monthly repayments as part of the cost of growing their businesses. Periodically some of them may have special offers for zero deposit insurance including interest-free repayments and even special online discounts. This of course would be no use to you whatsoever if the special offer cropped up before or after you wished to buy your insurance so the only way to make sure of getting the best deal at the time is to take a look at very many offers simultaneously and then select the best deal available; in other words start your search early.
Insurers usually allow you to reserve an offer for 30 days for your renewal is due, so start looking for your next policy around this time. Research suggests that this is the cheapest time to buy your cover, anyway; insurers tend to smile on people they view as well organised, but are not so impressed by those who do things at the last minute.
Be careful though:
It is vital that, if you agree to make monthly repayments for your car insurance, you actually complete your side of the bargain. This is because insurers take a very dim view indeed of people who stop their payments in this manner; you will almost certainly find that the insurance contract lays down stiff financial penalties for this type of action and, yes, they not only will probably pursue you for these but may also circulate details to other insurers which could mean that you could find it difficult or even impossible to get hold of cover on reasonable terms in the foreseeable future.
To sum up ...
this type of policy may or may be in your best interests, depending upon your own individual circumstances. In order to make a properly informed decision make sure that you get the maximum number of quotes that you can that include not only the monthly repayments but also the amount of the full upfront payment, so that you can make a properly informed decision.