Car insurance covers you for the cost of damage you cause in an accident or in the event your car needs replacement or repair. Many factors determine what you pay for auto insurance, and insurance companies have different methods for breaking up your premiums to make policies appear more affordable. In most cases, you must pay a deposit when you first sign up for auto insurance, but not always.
Each auto insurance provider has its own payment options for customers. In most cases, each customer has a choice of how to pay. Options may include a monthly bill, two payments per year, bimonthly or even weekly payments. Insurers may even charge interest or convenience fees when customers select monthly or weekly payment options.
Deposit as First Payment
Regardless of which payment plan you choose for car insurance, your first payment is a deposit that credits your account. You may specify that you don't wish for your coverage to begin until a certain date, such as the date when your existing auto insurance expires or the day you take delivery of a new car.
Your deposit counts against your policy cost and serves as your initial payment until the insurance company begins sending regular bills according to your chosen payment schedule. If you cancel your coverage early, you may be able to receive a refund for part of your deposit, or you may forfeit the deposit if your policy terms state that it is nonrefundable.
No Deposit Insurance
Some companies offer car insurance under the title of no deposit insurance. This type of insurance is more common outside the United States and from smaller insurance providers. No deposit insurance simply allows drivers to begin a new policy before making their first payment. In most cases, no deposit insurance costs the same as a policy that requires a deposit, if not more. However, it delays the payment due dates so that the policyholder makes no payment up front.
Another situation where you might not make a deposit on car insurance is if you pay the full cost of your premium at the time you sign up for a policy. Since most policies renew each year, this is most likely with short-term auto insurance, which you would purchase while you shop for a long-term policy or while borrowing or renting a vehicle for a set length of time. Paying the full premium up front means you won't need to make another payment, which eliminates your balance due and serves as a payment in full rather than a deposit.
Are Annuities FDIC Insured?
The Federal Depository Insurance Corporation (FDIC) regulates only bank products and has no control over or involvement with the insurance industry. The...
Why Do Banks Pay Interest on Savings?
Banks are financial institutions that make money, in part, by lending to individuals, businesses and other organizations and charging interest on borrowed...
Do You Have to Buy the Car After You Paid the Deposit?
You can back out of a car deal after you've paid a deposit. Depending on the agreement you made with the dealer,...
Do I Have to Pay Taxes on a Money Market Deposit Account?
Money market deposit accounts are a type of savings account offered by banks and credit unions. The Internal Revenue Service requires account...
Why Is There a Down Payment When Leasing a Car?
Lease advertisements usually call for a down payment in addition to taxes and fees. You do not have to put anything down...
Laws for Used Car Deposit Refunds
The law with regard to used vehicle purchases and related deposits varies from state to state and does not fall under any...