When you shop for a new car insurance policy, many insurers will charge extra for your first month's payment, which is called the deposit. Some drivers will qualify for no-deposit car insurance, which means your first month is the same as or cheaper than the following months.
How no-deposit car insurance works
When you start a new car insurance policy, you'll have the option of paying monthly. For some drivers, the first payment will be more expensive than the next month's payments, and this difference is called the deposit or down payment. The deposit is applied toward future months' premiums and encourages you to maintain coverage with the company through the length of your policy.
No-deposit car insurance means your first month is the same as or cheaper than the following months. The size of the deposit, or extra amount on your first payment, depends on factors like your car, driving history and state. In general, people with safe driving histories and high credit scores are most likely to qualify for no-deposit or low-deposit car insurance.
No-deposit car insurance isn't a specific policy offered by insurance companies, and it doesn't mean you'll be able to get car insurance without paying for the first month.
Sample quote with no deposit
When you get a quote, you'll often see three numbers to consider:
- Deposit/first month cost
- Monthly recurring cost
- Cost to pay in full
Progressive's quote page breaks down your first month's cost, monthly payments and total premium for a no-deposit car insurance policy:
In this example, if you chose to pay for monthly car insurance with no deposit, you'd pay $34.35 for your first month and $65.13 per month for the next five months. Your six-month premium would be $360.
If you wanted to pay in even installments instead, your monthly bill would be the same every month, $60.
If you'd paid for all six months in advance, your six-month premium would be $320, which breaks down to $53 per month. You'd save $40 by paying up front.
Companies with the cheapest no-deposit car insurance
Not every car insurer offers very cheap car insurance with no deposit. Geico, Progressive and State Farm all had low or no deposits, based on sample quotes for a driver with a good driving history. In fact, Progressive offered a lower rate for the first month than for the following months.
Most insurers also charge a small fee to make monthly payments. Of the three major insurers we compared, only State Farm charged the same amount whether you pay premiums in monthly installments or a lump sum.
One downside to paying a lower premium for your first month is that your monthly cost will go up after the first month. The total cost of your policy isn't spread out evenly, so you'll end up paying slightly more after the first month. Make sure you can afford the next month's payment or you'll risk having your policy canceled for nonpayment and becoming uninsured.
Find Cheap Auto Insurance Quotes in Your Area
Who can get no-deposit car insurance
Not everyone will be able to get cheap car insurance with no deposit. In general, a driver who is seen as low-risk will have a lower insurance deposit or no deposit and cheaper monthly rates. How much you'll have to spend to begin coverage depends on the same factors that go into your insurance rates, which include your state, car, driving record and credit score.
Depending on the insurer and your risk factors, your first month could cost the same as or less than the next months, or you might pay anywhere from a few dollars extra to a significant fraction of your total premium — up to 30%. A high-risk driver with a poor credit score or multiple previous claims or accidents will likely be on the higher end of that scale.
How to sign up for no-deposit car insurance
If you want to pay your car insurance in monthly installments and find a no-deposit or low-deposit policy, start by getting free car insurance quotes and comparing costs from multiple companies.
1. Set your budget
Figure out how much you can afford to pay for car insurance each month. From there, you can calculate the coverage you can afford.
2. Get quotes
Start by getting multiple quotes from the cheapest companies you can find. Fill out info about yourself, your car and your driving history to get accurate quotes online. Once you've gotten quotes, compare your first month, monthly and total costs side by side to make sure you're getting the best deal.
3. Set up payments to start your policy
Most companies will let you pay your car insurance bill with electronic funds transfer (EFT), credit card, debit card or check. Some companies will charge an extra fee for certain methods, so keep that in mind before choosing your payment method.
Once you've received your quote, you can generally purchase your car insurance instantly. Most insurers offer instant car insurance with no deposit, meaning you can get coverage the same day as soon as your payment is processed.
Simplify switching car insurance
Switching car insurance companies can result in some big savings, but it has an extra cost at the beginning: You have to pay for your new car insurance before your new policy ends. You can request a refund from your old insurer, but it can take a while to receive. Luckily, there are some things you can do to make the process easier on your bank account:
- Cancel your old policy right after signing up for your new one: Car insurance refunds take time to process, so you should cancel your old policy right after your new policy is in effect.
- Pay with a credit card: Unlike other bills (like your car payment), you can pay for car insurance using your credit card, if you have one. Doing this means the money you spend on insurance won't actually leave your bank account for about a month after you pay your bill. Paying your current insurance bill with a card may also help you get your refund faster than having your insurer mail you a check.
- Save your quote for later: If you find a great price for car insurance but don't have the money right away, you can save the quote for later. Most insurers let you save a quote for at least 30 days, but some insurers let you save it for much longer — for example, Progressive lets you save a quote for up to 13 months.
Is no-deposit car insurance a scam?
Since no-deposit car insurance is not a term regularly used by reputable car insurance companies, the phrase is sometimes used by disreputable companies in misleading or confusing ways.
Car insurance companies will not provide immediate coverage before you've paid for it. Be wary of companies that claim you can "buy now, pay later" or get your first month free.
Your policy is typically not active until an insurer has proof of payment. Companies that promise "$0 down" car insurance could be scamming you to get your personal info, or they might offer you a deal that's too good to be true and take your money later without giving you an actual policy in exchange.
Paying for quotes
Another scam is requiring a deposit to get a car insurance quote. If an insurance company or agent states or implies it's typical to charge for an insurance quote, this is a red flag about that company's trustworthiness. No major car insurance companies will require a deposit or fee for a quote.
Temporary car insurance
If you can't find cheap no-deposit car insurance, you might be tempted by companies claiming to offer temporary car insurance. But reputable insurers don't typically sell car insurance for less than six months. The best way to get car insurance for a short period is to pay monthly, since you can cancel and switch at any time and receive a refund for any premiums you've already paid in advance.
Frequently Asked Questions
Can I get car insurance with no deposit?
You can't get car insurance without paying something for the first month, at least not from a reputable car insurer. You can get car insurance with no or low deposit for a cheaper first-month payment, but you'll usually pay more for each month after that.
Do all companies require a deposit?
All reputable companies will require you to pay for your first month before they will cover you. Some may charge less for your first month, which is sometimes called low-deposit car insurance. Once you set up your payment, you can often have your coverage start the same day, or the next day in some states.
Who has the cheapest no-deposit car insurance?
The best way to save on your first month's premium is to find the overall cheapest rate for the coverage you need. USAA, State Farm, Farm Bureau, Erie and Geico have the cheapest online rates for most drivers, according to our experts' rate analysis. Start your search for the cheapest no-deposit car insurance with these companies.
How do I get my deposit back?
If you need to switch or cancel your car insurance partway through your policy, you can get your deposit back with a prorated refund. Once you cancel, your current insurer will send you a check with the remaining premiums you've already paid for.
Do I need to pay a deposit with pay-as-you-go car insurance?
It depends. Some telematics insurers like Root and Metromile offer same day car insurance, but the rate you get for the first month from some insurers might include a deposit depending on your driver profile. Your cost for the next month will be based on your driving skills and actual mileage, and that rate might be higher or lower than your first-month premium.