The truth about no-deposit car insurance

Written by: Sarah Brodsky
• Updated •5 min read
This date may not reflect recent changes in individual terms.
Woman driving her car with a serious expression on her faceImage: Woman driving her car with a serious expression on her face

In a Nutshell

You can’t get car insurance without putting money down, but some insurers offer policies without a large deposit. Some policies allow you to start coverage after just one month’s payment.
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You won’t find car insurance without a deposit.

While you may hear the phrase “no-deposit” car insurance, it’s misleading. It’s not possible to take out an auto insurance policy without putting money down. But you might be able to save on your upfront costs if you find a company that charges a low monthly premium and will let you start coverage with just the first month’s premium payment instead of a larger deposit.

Since you can’t get an auto insurance policy without making a payment, major insurers won’t typically use the wording “no-deposit insurance” to advertise their products. And scammers might use this phrasing in an attempt to lure you in.

So to save money on your first insurance payment, it’s better to research the offerings of reputable insurance companies and compare quotes rather than searching specifically for a no-deposit policy.

Can you get car insurance without a deposit?

It’s not possible to get car insurance with no money down. But some insurance companies, like Allstate and Progressive, don’t require an additional deposit on top of your first month’s premium, so you may be able to pay the same amount each month of the policy.

When you sign up for car insurance, you’re agreeing to pay the insurance company a premium. In exchange, the insurance company will pay you up to specific agreed-upon amounts if your car is stolen or damaged or in an accident.

Some car insurance companies offer discounts when you pay the entire premium upfront. Others require a large portion of the premium upfront, followed by smaller monthly payments.

Is no-deposit car insurance a scam?

When describing a car insurance policy paid for with equal monthly premiums, “no-deposit” car insurance is not a scam, provided a legitimate company sells it. Reputable insurers may offer customers policies that don’t call for a big upfront deposit.

One warning sign to watch out for is when an insurer promises to provide auto coverage with no money down or claims you can get the first month’s coverage for free.

Also, watch out for companies offering temporary car insurance. Reputable insurers will require you to buy coverage for at least six months. Legitimate insurers provide quotes for free. Don’t pay anyone to give you a quote.

How to find low-down-payment car insurance

Get several car insurance quotes and inquire about the down payment amount. You can often call insurers, visit their websites or go through an insurance agent. After you provide information such as your Social Security number, driver’s license number, occupation and make and model of your vehicle, you’ll receive quotes that show the premium, deposit, claim limits and deductible for the policy.

Once you receive the quotes, compare the premium’s first payment amount with the following monthly premium. If you aim to avoid a higher price for the first month, quotes should provide this information. If you’re still unclear about how much you’ll pay to start coverage, it might be a good idea to call the insurance company directly or speak with an agent.

Compare the quotes and choose a policy with the level of car insurance coverage you need and a premium you can afford. The insurer will often tell you how to proceed with setting up a payment plan and will tell you which payment methods they accept.

Tips on how to lower your car insurance premium

If you’re unsatisfied with your current policy, there are ways to lower your car insurance that don’t include searching for no-deposit car insurance. Here are some potential savings you may want to consider.

  • Lowering your liability coverage limits: Each state has minimum liability coverage requirements, but if you currently have more than the minimum, you may be able to lower your monthly premium.
  • Exploring usage-based insurance programs: If you’re a good driver, signing up for a usage-based insurance program could earn you a hefty discount for your good driving behavior. For example, good drivers could save up to 40% on car insurance when enrolling in Liberty Mutual’s RightTrack program.
  • Searching for discounts: The number of car insurance discounts you may receive varies by insurance company, but there are plenty of ways to save. If your current insurer offers limited discount options, companies like Farmers, American Family and Geico have plenty to choose from.
  • Signing up for pay-per-mile insurance: If you don’t drive often but still want to keep your vehicle insured, pay-per-mile car insurance could be a good fit. Insurers like Metromile charge a flat monthly rate and an additional rate per mile you drive.

Always remember to shop around for multiple quotes before choosing your next car insurance provider.

FAQs about car insurance down payments

It’s essential to understand your options before you choose auto insurance. Ask the insurer if you have questions about a particular policy.

Why do insurance companies charge a deposit?

Insurance companies charge premiums that cover the cost of the claims they pay out, with some money typically left over as profit. No insurance company will want to take on the risk of needing to pay claims for a person who isn’t a paying customer, so they require at least a first month’s premium before they start coverage.

Is car insurance cheaper if you pay upfront?

You might get cheaper car insurance if you pay the entire premium upfront, rather than paying monthly over the length of the policy. Whether you can take advantage of a discount for paying upfront depends on which company you buy insurance from and your location.

For example, Progressive offers a discount for upfront payment except for customers in California, Travelers offers a discount for paying in full, and American Family grants a discount to customers who pay in full within three days after finalizing their policy.

Can I pay the insurance premium in cash?

Some companies, like Nationwide, may allow you to pay your premium in cash. But it’s more common for insurers to list other methods like paying by debit or credit card, check, money order or electronic funds transfer. If you want to pay with cash, you should call the company ahead of time to find out if it will accept it.

About the author: Sarah Brodsky is a freelance writer covering personal finance and economics. She has a bachelor’s degree in economics from The University of Chicago. Sarah has written for companies such as Hcareers, Impactivate and K… Read more.