Need car insurance - but don't want to pay a large deposit?
Can you buy car insurance without a deposit? Can you then pay
for your premium with monthly payments?
Some insurers will let you spread the cost of your motor policy over a full year with as little as a twelfth of the premium payable at the start and then a further 11 similar monthly payments.
If you pay this by credit card you don't need to actually pay anything out of your own pocket until your card payment falls due.
Is 'no deposit' cover more expensive?
- It depends. If you compare prices and switch to a new insurer you may well end up paying a lot less. Many insurers welcome new policyholders by giving them a very cheap initial premium so even if you pay more for the privilege of monthly payments you could still end up with a lower premium overall.
- It is usually slightly dearer to pay monthly than with a single payment, in advance. However, some insurers offer deferred payment terms for very little extra, and sometimes with no loading at all. This is because there is a huge demand for this type of policy so competition amongst insurance companies to attract new business is fierce.
- By making a "no deposit" price comparison you could search for the most competitive policy available, and possibly save a lot of money. You would also be able to see the total cost for monthly payments, as well as the cost for paying it all upfront, so you would be able to decide which option was best for you.
- Consider sticking to UK insurers. Many of the cheaper companies are based in jurisdictions like Gibraltar where they are not obliged to register with the UK Financial Ombudsman Service which could, otherwise, be very helpful if you have a complaint against an insurer or other financial company.
How could you save money by switching insurers?
Car insurance companies love motorists who renew their policies year after year. It is easy for them to charge higher premiums at each renewal and the customer rarely notices because they can't remember what they paid last time, and the insurer usually doesn't tell them! They can also offer extras such as a guaranteed courtesy car, personal accident cover or legal expenses cover at highly discounted prices, but at renewal time these are charged at full price and again many motorists don't notice.
Many of these extras offer poor value to the motorist but a high profit margin to the insurer.
On the other hand they are aware that most drivers now compare prices so they have to make sure that their initial offering is tempting enough to attract new clients, without which their businesses would wither away. You can benefit from this by making sure that you renew your policy for the best price available.
Does this mean you would have to deal with 'cheap' insurers?
No. Most of the top, highly reputable companies are very flexible with their premiums and are willing to reduce prices for new customers. The cheapest insurers should always be viewed with suspicion; some of them are not as ethical as they should be, and they may claw back more money from you by charging high prices for extras such as increases in your estimated mileage, changes of job or address, or reporting of accidents. You have to inform your insurers of alterations like these otherwise you could invalidate your policy, and charges made for what are, after all, very simple clerical jobs range from nothing at all to more than a hundred ounds in some cases we have seen.
How do you avoid risky insurers?
- Never buy a policy without looking for reviews of the insurer online. Always - yes always - read through the policy documents before handing over your credit card details. You can then make sure what benefits you are getting for your money and, just as importantly, what you are not.
- Insurers are obliged to make this information easily available and in language which is clear and easy to understand. If you cannot find it or it is difficult to read then try a different company.
What happens at the next renewal?
You will often be invited to simply carry on making monthly repayments at the new rate. You will be encouraged to continue with the same insurer because, 'for your convenience' they will automatically renew your policy without you having to do anything. At this stage you should, again, compare prices and if you find a better deal you would need to contact your current insurer to tell them not to renew after all. Very often they will offer you a reduction in your premium if you stay with them - they do not want to lose your business after all.
To sum up;
- A true 'no deposit' insurance policy for your car cannot exist because it would not be legal. However you could insure your car without paying out a lot of money upfront - or any at all immediately, if you pay by credit card.
- By comparing prices carefully you could switch insurers and not only get monthly payments with a low deposit, but also benefit from lower premiums too!