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Several car insurance agents advertise no down payment insurance plans. However, no reputable car insurance company will waive the requirement of at least the first month's premium upfront. There is no such thing as zero deposit insurance.
But do not despair. Divorced and separated co-parents can find cheap car insurance coverage by comparing quotes from several insurers.
Car insurance companies price an insurance policy based on several factors such as age, credit score, driving history, marital status, number of miles driven, vehicle age, and purpose. For example, drivers under the age of 25 or with accidents and speeding tickets on their records pay higher premiums than others. Similarly, drivers with a poor credit score or new car owners may pay higher premiums.
While we all expect to find the lowest insurance premiums, getting cheap car insurance can get a little tricky after you are divorced. While divorce by itself doesn't increase your car insurance premium, other factors related to the divorce may. For example, during the marriage or the divorce process, your ex may have decided not to pay their debt obligations. It will hurt your and your ex's credit. Or it is possible that while paying divorce-related legal fees, you may have missed a couple of credit card payments. When you were married, you shared the premium with your ex. But now you have to pay for it yourself. Or you have a teen in the family who is ready to drive, and the obligation of their insurance premium is on you, not the co-parent.
As stated above, there is no such thing as "no deposit car insurance." It is a buzzword created by marketers to attract vulnerable consumers who are not insurance savvy. The car insurance premium is for twelve months. The car insurance companies offer several options to pay your premium:
Depending on the payment option you select, you may get a discount. But regardless of the payment plan your select, you will need to pre-pay the premium for that period. The consumers paying annually, semi-annually, or quarterly may be eligible for a 5-10% discount on their premium.
When you are signing up for no deposit car insurance, what it means is that you are opting for a monthly payment plan. Since the monthly payment plan is much lower than other options, it is called no downpayment insurance plan. However, in reality, you might be paying a higher insurance premium over the life of the policy. It costs more to process twelve monthly payments vs. one or two payments lump-sum every year.
For example, below is the car insurance policy quote that I received with two payment options:
| Cost | Monthly | Annually |
|---|---|---|
| Deposit / First Payment | $250 | $2400 |
| Monthly Premium (x11) | $200 | $0 |
| Total Cost | $2450 | $2400 |
| Savings | $0 | $50 |
This premium covered the state's minimum liability insurance, PIP, comprehensive insurance since the vehicle is new, and the collision coverage. It also provided the uninsured and underinsured coverage and a rental car if the car is not available due to an accident.
While you may be looking for non-existent no downpayment car insurance, it is possible to get low premium car insurance with qualifying discounts. The low premium will depend on several factors:
Most car insurance companies will require the first month's premium as a deposit, usually higher than the remaining months because it covers the policy issuance costs. It also eliminates shoppers looking for an insurance plan to get their vehicle insured to get financing and then cancel it. Some states do not require car insurance and a pre-paid insurance plan allows the insurance company to manage the risk.
Below are some tips for drivers who are divorced or going through one to get the lowest rates possible:
To qualify for the lowest possible premium, you and your spouse should continue the coverage through the current policy. Most states will not allow one spouse to cancel the insurance policy or remove the other one from it. For example, California divorce summons includes a restraining order prohibiting both parties from altering or canceling the insurance policy. Similarly, New Jersey requires an affidavit from the estranged couple agreeing to no changes until after the divorce or legal separation decree. In some cases, the judge may even order the insurance company to freeze the policy from any changes. In extenuating circumstances, the court may allow you to cancel or change an insurance policy during the divorce proceedings.
During the divorce proceedings, you have to pay the premium. The money should either come out of a joint account. If one of the spouses was the breadwinner while married, they should foot the bill. The court may also order one spouse to continue with the insurance premiums as part of the spousal support.
Unless the court orders to do so, you must separate your insurance policies and vehicles. Also, you need to determine who will be paying for children's car insurance if you have any of the driving age. Or if it is going to be a shared expense. It will impact your premium after divorce.
Shopping around and comparing the insurance rates is the best way to find the cheapest car insurance. You should start comparing quotes from reputable insurance companies. Below is a list of a few:
If you are do not drive a lot, there are pay-per-mile insurers such as Lemonade/Metromile and Root Insurance.
The higher the deductible, the lower the premium would be. For example, if you pick a $500 deductible instead of $250 per accident, your monthly premium may drop by 20-30%. However, you need to make sure that you can pay that deductible if you get into an accident.
Several insurance agents tend to sell you more coverage than what you need. For example, your premium can drop by 50% if you drive an old car and choose only the liability coverage. However, the downside of this approach is if your vehicle is damaged or stolen, you will have to pay out of pocket to get it fixed or replaced.
You may be eligible for several insurance discounts. Below are some of the common discounts offered by all major insurance companies:
You cannot receive a discount because of your race or religion. Federal laws prohibit insurance companies from discriminating against ethnic, racial, and religious minorities. Similarly, discrimination against LGBT and women is not permitted.
The more claims you file, the higher your insurance premium will be. If your car has a small scratch or a ding, it might be cheaper out of pocket to pay for it instead of going through the insurance. Your insurance premium can significantly increase if you file a claim.
Insurance premiums are determined based on your neighborhood. If you live in a high-crime area, your premium will be higher. By moving to a safer neighborhood you can reduce your insurance rate and live safely.
If possible, you should consider moving to a cheaper state. It may be difficult if you are a co-parent but not impossible. For example, a Portland resident can save a bundle by moving to Vancouver. States that offer the lowest insurance rates for no deposit plans:
While there is no way to avoid any upfront payment, the divorced or separated co-parents can get cheap no deposit insurance without breaking the bank. Shopping around and keeping their driving record clean is the key to low-rate auto insurance.
Related:
Financial Success After Divorce
Decoupling Your Fiances After Divorce
Rebuilding Your Credit After Divorce
Warning: This post is neither financial, health, legal, or personal advice nor a substitute for the advice offered by a professional. These are serious matters, and the help of a professional is recommended as it can impact your future.