5 Reasons to Avoid No Down Payment Auto Insurance

Most people are happy to save money on car insurance, but looking for coverage that requires no down payment is not a good way to go about it. Despite the fact that real no down payment car insurance is extremely hard to find, you might not find the coverage that you need.

Find coverage for your car insurance needs right here by placing your ZIP code in the FREE box now!

Most car insurance providers require some sort of down payment in order to have coverage. While most states have laws requiring insurers to break a premium into monthly payments, there are no regulations or rules about the lack of a down payment. The Massachusetts Office of Consumer Affairs and Business Regulation offers a list of the payment schedules used by the major insurers in that state; not one mentions a $0 down payment.

Many drivers have to pay for their insurance premium in installments; they just don’t have the cash on hand to pay a premium in one lump sum. While payment options can be beneficial to a budget one with no down payment will likely not help your bottom line.

#1: Your Coverage Is Questionable

First and foremost, the status of your coverage may be in question. A car insurance policy is a legal contract. You agree to pay a specified amount, and your insurer agrees to cover you for a certain level of coverage for the perils named by the policy.

Usually, it requires a payment on your part to make the contract binding. If you are not fulfilling your end of the contract, how can it be legal? Then, the insurer is not bound to uphold their end of the bargain, either.

Few things are as stressful as suffering a car accident, theft, or other loss and finding out that your insurer is not going to cover you.

Unless you make a down payment towards your policy, you can never be certain that your coverage has started.

Car accidents are expensive events that include medical bills and auto repair bills for yourself and others. The purpose of an insurance company is to pay those bills; the whole idea of insurance is pretty worthless if the insurer is not going to pay your claims.

#2: It Might Be Fraud

Furthermore, an insurance company that promises that you don’t need to make a down payment to start coverage is very likely to be a scam. Fraudulent insurance companies or fake agents posing as representatives of a company are likely to make claims that are just too good to be true, according the investigators to the Coalition Against Insurance Fraud.

Promises of really low rates or policies that don’t make sense—such as the lack of a down payment—show that an insurance company or agent really isn’t legitimate. Chances are, they will take your money when you do make a payment, and then run. You will be out of luck and will likely have a lapse in coverage to add insult to injury.

Thoroughly research any company that offers a no down payment option before buying a policy. Use the National Association of Insurance Commissioner’s Consumer Information Source (CIS), call their verification number at 1-866-470-NAIC or contact your state’s department of insurance.

#2: The Company Might Not Be Reliable

Another likelihood is that the company offering the no down payment option might not be reliable.

While the company offering no down payment coverage might be licensed and legal, that doesn’t mean that they use legitimate business practices.

Such companies might offer a no down payment option because they don’t plan on paying any of your claims whatsoever. They can afford to wait for your payment because they don’t follow the usual insurance business model of taking in premiums and paying out in claims; they just do the first part.

Such companies might be right on the edge of fraud or even bankruptcy, and they certainly won’t have a good reputation. Generally, such companies are online businesses or fly-by-night insurers that are only interested in taking your money.

Contact your state insurance bureau to see any complaints lodged with the bureau about a certain provider. You can contact them by phone or on their online website. Remember, just because a company is licensed does not mean they are reputable.

#3: It Could Be False Advertising

Since having no down payment doesn’t really make sense because you will have to make a payment at some point in time, such promises are likely to be false advertising aimed at getting you to a sales pitch. Once you get to the point of discussing payment, you find that you regrettably don’t qualify for the no down payment option, but you can make a payment with a credit card, electronic check, etc.

While such promises might not necessarily be illegal, examples of such blatantly false advertising don’t do much to recommend an insurer to consumers. Such deceptive practices don’t bode well for the reputation of an insurance provider.

It may make you wonder what else they might lie to you about. Auto insurance isn’t a business in which you want surprises. Really, how good can a company be if it has to resort to telling lies to get you to its website or offices?

#5: It Could Cost More in the Long Run

Even if a car insurance company really does offer a no down payment option for starting your policy, it might cost you more in the long run. You have to pay for your coverage at some point in time, and there really isn’t any benefit to putting it off.

Just like insurers charge an installment fee for the convenience of breaking your premium up into smaller monthly payments, you might have an additional fee for basically deferring your down payment to a later time.

The only reason why you might want to take advantage of a no down payment option is if you don’t have the money to make a down payment in the first place. Most insurers offer payment schedules that break payments up into one larger initial payment and then subsequent monthly payments.

It’s not as if you have to pay your premium all at once. Most installment schedules should be affordable; you should really question your ability to pay for a car and coverage if you can’t afford an initial down payment. It should be a red flag for your own finances that you are looking for a no down payment option with an insurer because you can’t afford to pay one.

If you find a company that truly offers a no down payment option, you are just deferring your payment until a later time. You will have to pay something eventually, and there is no guarantee that you will have the money to pay it then.

Perhaps you should defer the process of putting your vehicle on the road until you are sure you can afford it. Try to carpool or take public transportation until you have the money saved and you can meet the monthly payment obligation easily. Perhaps you can find other areas to cut back on if you really need to have your car.

Other Ways to Save on Insurance

Deferring a down payment is not the only way to save money on car insurance. Actually, it isn’t saving you money at all because you will eventually have to pay your premium at some point. There are ways to save on the cost of insurance without skimping on coverage.

The most recommended option when you are trying to save on your auto insurance costs is to get quotes to compare from several car insurance providers.

The experts at the Insurance Information Institute rate shopping around as the best way to save money on insurance costs.

You can get quotes online, over the phone, or with an agent at an insurance office. Quote comparison websites such as this one can be invaluable in helping you get many quotes. They save you time and effort by letting you get many quotes from just one application.

Make sure that you know how much coverage you need beforehand, and then get quotes for exactly that same amount of coverage; quote comparison websites will automatically allow you to get quotes for the same amount of coverage. Then, you can compare one quote to another because they will all be for the same level of coverage.

After you get your quotes, make sure to research the reliability of each and every company that your are considering. Remember that you should not choose a provider based upon cost alone! You need to also look for a company with financial strength and a reputation for good customer service.

Utilize financial ratings organizations and consumer ratings that show that a company is strong. When you find a provider with an affordable price, strong financial ratings, and great customer service, then your search is done. Prepare to make a down payment and join the ranks of responsible car owners.

Start your search for car insurance quotes once you insert your ZIP code in the FREE search box on this page!