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What Is No Down Payment Car Insurance?

by | Jun 10, 2020

Every year, there are more than 6 million car accidents on American roads. While most of those accidents are minor, you still want to have car insurance in place to protect your ride. Unfortunately, insurance isn’t always as cheap as you might expect.

Even cheap standard car insurance policies have upfront down payment fees that you have to pay to qualify for coverage.  If you’re shopping on a budget and don’t have much saved up to use toward an insurance policy, finding quality coverage can feel almost impossible. Luckily, no down payment car insurance does exist.

Here’s what you need to know about this unique coverage option.

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How No Down Payment Car Insurance Works

No down payment car insurance is exactly what it sounds like: car insurance that doesn’t require the standard down payment to start your coverage. When you purchase this type of insurance, the insurance company will expect you to pay your first month’s premium only.

The insurance provider won’t ask you to pay anything else during that first month. Once they receive your premium payment, your coverage starts immediately, and you’re ready to hit the road.

The coverage isn’t available in every state, but your insurance agent will be able to tell you what your options are by looking at your financial situation.

What Makes It Different from Standard Car Insurance

When you take out a standard auto insurance policy, you’ll need to pay both the first month’s premium and the down payment the insurance company expects. Without that, you won’t be able to purchase the policy.  Those additional fees come from your levels of risk.

For example, if you live in a higher risk area with more incidents of vandalism or drive stretches of road where accidents happen frequently, you may need to pay more upfront. With no down payment car insurance, that increased risk gets factored into your monthly premium payments.

That means you’ll pay more, but you’ll avoid the stress of having to come up with the additional money when you apply for the policy. The payments will get broken up into chunks based on your payment plan.

How You’ll Pay For Coverage

Ultimately, no insurance payment plans work similarly to traditional coverage. You can pay monthly, quarterly, or cover the entire year in one lump-sum payment.

It’s normal for most drivers to choose to pay in installments. That helps break up the total cost of the policy into manageable monthly payments. Those payments typically stay consistent for the life of your policy, making it easy to budget your money every month.  Keep in mind that monthly payments are the most expensive. You’re paying for the convenience of being able to break the payments up over the year, just as you would with standard car insurance.

The more money you can afford to pay upfront, the cheaper your insurance will be.

Who The Policies Are Best For

No down payment car insurance plans are best for people with good credit scores and clean driving records. Most insurance providers look at your credit score when you apply. This helps them determine how much your insurance will cost and gives them an idea of how risky it is to issue policies to you.

Typically, insurance companies consider drivers with low credit scores as higher risk. That is because they don’t have a proven history of paying off debt and are more likely to stop making payments on their insurance coverage.

Similarly, if you have accidents on your record, your premiums will likely be higher. That is because you’re more likely to file a claim which will cost the insurance company money.

When You Should Choose No Down Payment Coverage

Ultimately, standard car insurance policies will be more affordable and can offer you better premium rates each month. However, if you don’t have the money to pay your deposit upfront and can’t qualify for standard coverage, no down payment insurance is a great alternative.

You’ll get your coverage immediately after you make your first month’s premium payment. Remember, you can’t register or legally drive a car without having your state’s minimum insurance amounts covered.

What to Look For In A Cheap Car Insurance Provider

When shopping for car insurance companies, you’ll need to start by looking specifically for no down payment insurance companies. Not all insurance providers offer this type of coverage, and not all states honor this type of insurance.

Do your research and make sure the companies have the right license to issue insurance in your state.

Once you have a list of providers in mind, take the time to see what other drivers have to say about their services. Read up on reviews and check their reputation and make sure most of the reviews are positive.

You’ll also want to pay attention to the way their insurance representatives treat you when you call for auto insurance quotes. Ideally, they’ll take the time to understand your insurance needs and your budget before generating quotes for your car. If they seem rude or unresponsive, you may want to keep looking.

How You Can Get The Cheapest Car Insurance

For drivers looking for no down payment car insurance, it’s reasonable to want to look for the cheapest coverage possible. The cheaper your coverage is, the lower your monthly premium payments will be.

However, finding the cheapest car insurance doesn’t mean you have to settle for poor coverage options. You just need to take the right steps to make sure you get the best coverage possible.

Shop Around

The best thing you can do is shop around. Get car insurance quotes from multiple providers whenever possible.

Look at the coverage limits they offer, the premium amounts, and the types of payment plans they provide.

While it’s tempting to go with the cheapest auto insurance you can find, it’s far better to choose the provider that offers you the highest quality coverage at an affordable price.

Before you renew your insurance policy, it’s always a good idea to shop around again. Often, insurance providers will match lower quotes if you agree to stay with them for another year.

Avoid Filing Unnecessary Claims

Once you have your policy, do what you can to keep the number of claims you file with the insurance company to a minimum if possible.  Every time you file a claim, the provider can increase your premium amounts. That helps them offset the cost of future claims.

Before you file, think about the actual cost of the repairs. Get the damage inspected by a mechanic and let them give you an estimate. If the value of the repairs is less than your deductible, you might not want to file an insurance claim.

Make Your Payments on Time

The easiest way to qualify for cheap car insurance, whether you choose a standard policy or one without a down payment, is to make your payments on time.  Get in the habit of making sure you have the money set aside for your insurance every month. If you have outstanding debts or credit cards collecting interest, start paying down that balance as much as possible.

The more you can improve your credit score, then the more affordable your insurance will be.

Get Your Coverage Reevaluated Yearly

As your car ages, your insurance needs will change. Use this to your advantage.

Contact your insurance agent or insurance provider and get them to assess your coverage needs each year.  Some companies even reward long-term policyholders or safe drivers with discounts on their coverage.

Ask For Discounts

Even no down payment car insurance providers offer discounts to qualified drivers. Those discounts change each year, and the only way to know what’s available is to ask your insurance provider.  They’ll be able to look at the available discounts to see if you qualify for anything new. Most providers offer discounts for going paperless, insuring more than one vehicle at a time, and enrolling in auto-pay.

Find The Best Coverage For Your Needs

Ultimately, no down payment car insurance isn’t right for everyone. It can cost more than standard insurance and may be more challenging to qualify.  However, if you’re looking for coverage and don’t have money saved up for the required down payment, it’s a great option.

Ready to start looking for coverage but aren’t sure where to start? Check out our resources to help you find the right policy for your needs and your budget.

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