Cars Of The Past

Can you pay monthly for car insurance with no deposit?

Thousands of motorists search the Internet for 'no deposit' car insurance everyday. They will all be disappointed.

The truth is that although you can buy car insurance and pay monthly for it, you still have to pay something in advance. This doesn't have to be a great deal of money but if you don't pay at least a fairly small sum the policy just isn't legal! There are low deposit car insurance companies such as Prudent Plus Ltd or but no web site can arrange a policy for you without at least some immediate financial contribution from you.

Why do we have to pay in advance for insurance?

This is because of contract law. For an insurance policy to be enforceable there has to be a payment made before the policy is issued. If this is not done, no contract exists between the driver and the insurer.

How much would I have to pay up front?

This will depend upon your age, driving experience and accident/claims record if any. Your credit rating also comes into it.

The insurance company will want to be reasonably happy that you won't just make one or two payments, have an accident, and then cancel your payments. Unfortunately, experience has shown them that younger and more inexperienced drivers are far more likely to do this than older and more experience motorists, or to have financial problems which result in delayed monthly instalments.

So if you are under 25 you are likely to have to find at least 20 percent of the full premium before the policy will be issued. On the other hand if you are over 50 with a clean driving licence you could well get away with less than 10 percent.

Is it more expensive to pay monthly?

Yes. In effect you will be taking out a loan from the insurance company, or perhaps a finance company that they work with. You will be charged interest on this. How much interest you will be charged will vary from one company to another but your credit rating may affect this. If you have bad credit you may find the interest charges shoot up considerably, or you may not be able to be allowed to make monthly payments at all.

Can I cancel a monthly paid policy?

Just like a normal yearly pay policy, you have a right to cancel it at any time. However, the insurance company also has a right to charge you a fee for this. This varies from one insurer to another and it may be a reasonably small sum, such as £25 or so, or it could be considerably more.

Cancellation fees have to be spelt out clearly in the insurer's terms and conditions. When you first get a quotation you should be given access to these before you buy a policy, so that there are hopefully no shocks further down the line.

What if I have an accident, can I cancel a policy after that?

Normally the terms and conditions will specify that if you do have a fault claim you will be expected to continue to make your payments until you have settled the premium in full.

Can I still build up a no claims bonus if I pay monthly?

Of course. A monthly paid policy is exactly the same as a yearly paid one, the only difference being that your payments are spread over several months, instead of coming in one single sum.

Is there anyway I can get away with paying nothing at all in advance?

A number of motorists have taken out no-interest credit cards and paid for their insurance in that way. It is very important however that all the agreed payments to the credit card company are made on time, otherwise heavy interest charges might result.

Are there any other drawbacks to paying with just a small deposit?

Your choice of insurer may well be reduced. Some insurance companies are not happy about taking on customers who want to pay in this way. You may find that the only way to get the very best low-cost premiums is to pay in advance, and if you cannot do that you will be faced with not only paying more for your cover, but paying interest charges on the whole of the premium as well.

Should I pay for my insurance yearly?

You can buy motor insurance on the never – never (subject to status), but it will probably cost you a lot more. If it is at all possible you should pay with one lump sum right at the beginning, because this could save you a great deal of money.