No deposit car insurance

The dangers of lending someone your car

Short term car insurance and road tax

The last time I checked, there were over 800 websites advertising 'no deposit car insurance' listed in Google. Not bad for a product which, strictly speaking doesn't exist (but don't panic, so can still get insurance even if you're pockets have that empty feeling). An insurance policy is a contract, and a contract has to work both ways. There has to be an advantage to you; in that you get the insurance cover; but there also has to be an advantage to the insurance company; in that they have to get at least a deposit. Unless this happens, the insurance policy is not enforceable; any insurance company that got involved in a stunt like this would be put out of business by the Financial Services Authority in double quick time.

What can happen is that a small deposit is actually paid, but it is paid by your credit card company. And, you don't have to pay your credit card bill, or at least the minimum payment, until the due date, some time in the future.

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On the face of it this is a pretty good system for someone who is a bit short of cash and the premium just has to be paid. The payments are made monthly, each one being (usually) 1/12th of the total premium, and, yes indeed, since you pay the first one by credit card you don't need to have any money available immediately. After that every other monthly payment can be made by credit card so you can plan your finances confidently. And if you check the prices using a price comparison website which lists insurers that are happy to accept low deposits and monthly payments you may find a substantially lower premium too.

A possible drawback to paying for your insurance in this way is that you may be charged extra for it by the insurers, which is reasonable because you are in effect taking out a loan from them in order to pay your premium. However, car insurance is a highly competitive business and there are often very attractive offers available, and sometimes particular insurers are happy to waive the extras in order to get your business, and as a new client you may be eligible for a substantial discount too; insurers are well aware that once they have you as a client you are much more likely to renew your policy (at the normal, not reduced, premium!) next year.

So; buy your insurance through a price comparison site which offers low deposits and monthly payments, and look out for special offers, but check on how much it would cost you in total if you pay monthly, or pay everything immediately. You could then decide on whether or not the extra charges (if any) were acceptable to you.