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No Deposit Car Insurance

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No Deposit Car Insurance

Many insurance firms use the term no deposit car insurance as part of an aggressive advertising scheme to get drivers attention who have limited funds, but still need vehicle insurance. While technically the use of no deposit is factual, but payment is required within just a few days. Most brokers will accept a small deposit, followed by 10 monthly payments. Brokers will offer different deals and some call it low deposit car insurance. Either way spend some time getting multiple car insurance quotes to enable easy comparison. Low deposit insurance is available for all vehicle types including vans and 4x4's and motorbikes

Do I need to bring money when taking out a no deposit car insurance policy?

No, when taking out a no deposit insurance policy, no cash or funds have to be handed over to the insurance agent at the time the policy is signed. What does have to be presented is the bank account number that will fund the coverage.

How can they call this cover no deposit car insurance?

Technically no money is transferred to the insurance firm when the policy is taken out. This is how it can be called no deposit. With the surrender of the bank account number, the insurance company will set up an automatic withdrawal of the funds to activate the policy.

Is no deposit car insurance cheaper than the traditional policy?

The amount quoted for coverage will be the total amount before interest. It is how the premium is paid that makes this type of policy different from the standard cover.

  • No deposit cover divides the total cost of the premium by 12. This makes it possible for the first payment to be only 8.33% of the total amount. Each payment after that is also only 8.33% of the total premium. Added to the total cost of the premium will be a fee. This can be a flat fee of £5 per payment or which can be a variable 10% on the total balance of the unpaid premium costs. Since the initial payment is small, the balance left to be paid is higher than what a person would pay for a typical monthly installment plan.
  • Typical car insurance paid in monthly installments has an initial payment of 20% down. This leaves only 80% of the premium left as the balance. The 11 remaining payments are also only 7.27% of the premium total. This path still has either a flat fee of £5 per payment of a variable rate of 10% of the outstanding balance.
  • By paying the full premium amount when the policy is taken out, the fees or interest rates are avoided making this the lowest overall cost in terms of an annual premium.

What is the variable interest rate?

The variable interest rate is one that calculates the payment that includes the interest on the total amount of the premium still owed. With the no deposit car insurance, that amount is 91.67% when the second payment is due. The typical car insurance premium only has 80% of the premium left as the balance in which interest is accrued when the second payment is due.

Due to the outstanding balance of the no deposit car insurance, annually it is the most expensive, but it also has the lowest initial costs. Paying the premium on an annual basis is still the lowest cost overall.