Is it possible to get the coverage you need without making a down payment? Some providers offer installment plans that allow you to avoid making the full premium payment in one lump sum, but you still must make an initial payment before coverage begins. Installment plans spread out the cost of insurance over time, they usually require paying fees, and they typically require you to make a down payment to obtain coverage. Learn more about your choices for making auto insurance payments and the pros and cons of each option.
What No-Down-Payment Auto Insurance Actually Means
When you buy car insurance, you’re entering into a contract with the insurance company. You agree to pay a premium and the insurer agrees to pay for specified losses, up to your policy’s limits. For example, if you carry collision insurance, the policy will help pay to repair your vehicle following a covered traffic accident. Typically, insurance companies offer the option to pay your entire premium in one payment. Let’s say you purchase a six-month policy for $600 with an effective date of Jan. 1. If you pay the entire premium when it’s due, you can enjoy six months of coverage without making another payment.
Installment Plan Fees
Typically, insurance companies require you to pay a fee when choosing an installment plan. Fees can range from about $5 to $8, which you must pay each time you make an installment payment. For example, if you choose a plan with four installments with a fee of $8 per installment, you’ll pay $32 extra by the end of the policy term.
Paying Installments
Some insurers offer monthly installment plans, while others offer other arrangements. Installment options may vary depending on whether you’re a new customer or a long-time policyholder. For example, a provider may let customers choose between two or four installments, then five installments for new customers, or six installments for renewals. So if you chose four installments, you’d pay 25% of the premium each time, plus any fees.
Installment Plan Down Payments
Installment plans vary by company, and your down payment can differ depending on the number of installments you choose. For instance, if you buy a six-month policy, and choose to pay in two installments, the insurer might require you to make a 50% down payment and pay the remaining 50% of your premium a couple of months later. Some insurance companies offer a discount to policyholders who pay their car insurance premium in full.
How Much Is a Car Insurance Down Payment?
U.S. car owners paid an annual average of $1,190 for auto insurance in 2018, according to the National Association of Insurance Commissioners (NAIC). In part, your rate and your down payment,] will depend on the coverages and levels of coverages you carry. The amount of down payment you’ll have to pay for car insurance can also depend on your location, because most states require you to carry minimum levels of certain types of insurance. For example, Wisconsin motorists must purchase $10,000 property damage liability coverage per accident, $25,000 bodily injury or death for one person, and $50,000 bodily injury or death for more than one person. Connecticut’s liability coverage requirements are slightly different: $25,000 for property damage liability coverages, $25,000 per person, and $50,000 per accident. When you lease or finance an automobile, the leasing company or lender will also typically require you to carry collision and comprehensive insurance. You may also choose to add a few optional coverages, such as gap insurance, rental car reimbursement, or roadside assistance. Adding coverage increases your protection, but also increases your premium and down payment. The number of installments allowed, installment fees, and the percentage of the premium you must pay upfront will also depend on the insurance company. To illustrate, here are how installment plans work with four different car insurance companies operating in Massachusetts:
Age Annual mileage Coverage types and deductibles Coverage history Credit history (some states) Driving experience Driving record Gender (some states) Insurance claims history Location Make and model of vehicle Marital status Vehicle use
You can’t change certain rating factors, like your age. However, if you have a history of violations for speeding or texting while driving, changing your habits can help improve your driving record over time, and therefore likely lower your insurance rate. If you have a good driving history but aren’t satisfied with your insurance rate, there are several ways to possibly reduce it:
Shop around. Get insurance quotes from several providers and compare their rates and terms. Buy a vehicle with safety and security features such as anti-lock brakes and an anti-theft system.Raise your deductibles, or what you pay out of pocket. Take a defensive driving class.Drop coverages you no longer need or coverages that overlap. For example, if you’ve paid off your auto loan, and your car has a low market value, you might not need collision and comprehensive coverage.Take advantage of discounts. Insurers offer a variety of discounts, like discounts for young student drivers who earn good grades and “safe driver” discounts for motorists who have good driving records.Reduce your annual mileage.
