Can you buy car insurance without paying a deposit?
'No Deposit Car Insurance!' The headline screams. 'Buy Car Insurance with Nothing to Pay Upfront!' it adds. So is this true? Can you really insure a car without paying out anything at all?
No you can't. They are feeding you a line. No matter how big, well advertised and popular the website is, they simply cannot produce a motor insurance policy without some money been handed over in advance. Not a lot, admittedly, but unless you are over 50 you are likely to have to hand over at least 20 percent of the premium before a policy will be issued.
Not exactly 'no deposit' is it?
Why would anyone want a no deposit policy?
Shortage of immediate cash
Let's imagine a young man or woman who wants to get on the road but is short of money. Perhaps enough can be scraped together to either buy a car, or put down a deposit on one, but then reality steps in; it has to be insured. Where can the money come from? The problem with this is that buying car insurance on the 'never – never' is far more expensive than paying for it in advance in the normal way. The financial problem is not only just kicked down the road, but it also gets a lot bigger.
And let's be realistic – if someone cannot even afford to pay a deposit on an insurance policy, how is that driver going to afford the rest of the premium?
To get it taxed
In the early days of monthly paid policies a common practice was for motorists, usually youngsters who had money issues, to pay the first month's premium on a car insurance policy, get the car taxed and then cancel the policy. They would then drive around uninsured, hoping that the police wouldn't catch them.
Some of them got away with it for quite a while, too. However the authorities got wise to this and brought out the SORN regulations, and also started using numberplate recognition cameras by the roadside and in police cars, and comparing the results to a central database of insured cars. The number of prosecutions for driving without insurance went completely off the graph; and now it's virtually impossible to drive a car that's uninsured for more than a few days before the police take an interest in it.
Dishonesty is one of the main problems that insurance companies have to face. Stunts ranging from cash-for-crash, or getting a mate to set fire to a car that has developed expensive repair problems, have been growing in number; not only hitting the profits of insurance companies but also shoving up premiums for honest motorists.
Let's imagine a scenario in which criminals could insure a car, possibly with several different insurance companies at a time, without paying out a penny. Can you imagine how many ingenious schemes they would work out, to fiddle the insurers?
The result of all this
Any insurer that offered a truly no deposit policy would be committing commercial suicide. However that isn't all. The policy simply wouldn't be legal. Why?
An insurance policy is a contract between the insurer and the motorists who buys it. For it to be legal under the laws of the UK (and just about every other country we can think of) there has to be what is called a consideration before the contract comes into force. This means that each side of the contract has to have a benefit. The motorist benefits from the protection the policy offers, and the insurance company gets paid some money. No money up front, no legal protection.
So can you really get no deposit car insurance?
So, yes, many motorists can pay monthly with a low deposit. The older and more experienced they are, the more likely they are to have a decent credit rating, and the more willing the insurers will be to take a small sum in advance.
For younger motorists a 20 percent deposit is more realistic, and it has to be borne in mind that some of the cheaper insurance companies won't allow monthly payments at all, and insist on the whole premium in advance. This means that the cheapest policies may simply be unavailable to those who want to pay monthly, so a more expensive one would have to be bought. Then there are the interest and management charges…
If you can afford to pay upfront, do so, even if you have to borrow the premium from somewhere, or someone, else. An awful lot of motorists are paying for their premiums monthly but they are paying a heavy price to do so.