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No deposit car insurance - now available in the UK!

 Why not have a laugh? Check here for some hilarious car insurance excuses!

If the timing belt on your car breaks tomorrow and blows up your engine, or the big end meets the little end and splinters the inlet sprocket, or the paraffin you put in your tank to save petrol costs burns out all your valves, and you have the choice between spending what little money you've got left on fixing your car or paying for your car insurance, what do you do? Say "to h**l with the law, I'll drive whilst uninsured"; pack up driving on the grounds that if you fixed your car you'd probably wreck it again; or go online and buy some no deposit car insurance? What do you mean, you've never heard of no deposit car insurance?

 In the past, UK residents had to pay a lump sum annual premium for car insurance. However, a fairly new insurance scheme has recently been introduced to UK residents. Various insurers are now offering what’s known as "no deposit" car insurance. This scheme now allows a consumer to spread the total annual premium cost over a 12-month period. It is perhaps a misnomer because a deposit is always charged for every insurance policy - otherwise it would not be a legal document - but some of these deposits are very low, and they can usually be paid by credit card anyhow which means that the buyer doesn't actually have to find the money for the initial payment for some time.

The "no deposit" scheme makes insurance more easily affordable to the average consumer. It is becoming especially popular with students, young drivers, and drivers with low income or inconsistent income. It’s also popular with individuals who prefer to have access to their cash until the monthly premium is due.


Insurance as a contract

Insurers historically insisted on an annual or bi-annual lump sum premium payment due to the policy’s status as a legal contract. Some money had to be exchanged in order for the contract to be valid. Insurance companies wanted to ensure they received full compensation for the risks they were assuming. However, on those few occasions when the premiums were not paid fully in advance they did often request substantial deposits .

Due to the high cost of car insurance, many drivers can no longer easily raise an entire year’s premiums at one time. This is especially true for households with multiple cars and drivers, young drivers, and students. However, the number of households with multiple cars has been steadily increasing over the past few years. Many insurance companies want a share of the market created by these households. Some of these companies are willing to take the added risks to obtain a share of the market. That added risk includes trusting the purchasers to fulfil their end of the insurance contract by making monthly instalment payments.

Please bear in mind that it is ESSENTIAL that if you agree to make monthly payments, you do in fact fulfil your side of the bargain. Insurance companies share information of this nature and defaulting on an agreement could make it very difficult for you to to obtain insurance at a reasonable cost in the future.

Fees and other charges

Although some companies do not charge an upfront deposit, they may charge processing fees. They may also include other charges, such as administration charges. Usually these fees and charges will be added to the first month’s premium instalment. In addition, you may be charged a cancelation fee, if you do not keep the policy for a specified amount of time.

Moreover, your premiums will be determined by the same methods whether you pay monthly, bi-annually, or annually. Thus, your premiums will not be any higher if you pay monthly. However, a no deposit plan may accrue interest rate on the total value of the annual premium, although this will vary from one insurer to another and there may be occasional special offers under which this is waived.

No deposit, short term, or pay as you go insurance

A no deposit policy (hopefully a very cheap one) is one that you take out for a year, and agree to make regular payments for it. Short term cover is a policy that covers you for a fixed period only of, usually, between one and twenty eight days, and pay as you go insurance has a rolling term which lasts for a minimum of one month  and can continue for up to eight months. At the end of each month a renewal notice is sent to you; if you do nothing the policy will be renewed for a further month, or you can  stop it by giving notice online before the end of the expiry date. Both pay as you go and short term policies permit you to get more specific cover only when you think you may require it but they lose the economical advantage the longer you purchase them for. Therefore, no deposit makes an excellent alternative to buying short term cover if you need it for more than a few months.

Other benefits

One other benefit of no deposit car insurance is that you can pay for it with credit or debit cards. You can also have the monthly premium instalment withdrawn directly from your checking or savings account. Some insurers will even give you a discount for these automatic payments.

Another benefit of no deposit car insurance is that you can obtain free quotes online. Some insurers will even allow you to purchase a no deposit policy through their web site. Other companies may insist that you visit their local office. However, you will certainly need to do careful research either way. You’ll want to check around for the best deal and best provider. Although you may want cheap cover, you don’t want bad or inadequate cover. Take the time to find a reputable insurance company that provides quality cover and services at a reasonable cost.

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