Do you get your deposit back from car insurance?

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Things to remember...

  • Some auto insurance companies charge their applicants an initial deposit when they submit their application
  • When you pay the down payment, your coverage will be activated right away while the application is underwritten
  • The deposit will either be a percentage of your premium or the first few months worth of the premiums
  • If the underwriter decides that you don’t qualify for insurance, you’ll get a portion of what you paid back
  • If you choose to cancel the policy before all of the premiums have been earned, you’ll get a pro-rated refund

Insurance isn’t just something you buy; it’s something you have to apply for. You have to qualify for coverage through a personal car insurance company before an agent will take your application.

If you provide information that indicates you don’t qualify for insurance, the agent will simply recommend that you solicit quotes from another carrier. If you do qualify, your application will be accepted and reviewed to verify what you indicated was accurate.

Not only do you have to provide a complete application to the insurer, you’ll also have to provide a payment for the coverage to take effect.

How much you’ll have to pay to bind your coverage depends on the carrier.

If you change your mind and cancel, you may be entitled to receive some or all of the money you paid back.

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Why do you have to pay a deposit when you buy auto insurance?

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While many people call the initial payment that’s due when the policy takes effect a “deposit,” the money that you’re required to pay doesn’t really fit the definition of the term “deposit.” It’s more of a down payment for the coverage than a deposit.

When you’re making a deposit on something, you’re paying money up front that will hold a product or that’s placed in your account and used to pay money when you’re late. The money that’s due at the beginning of the term when you’re applying for insurance is simply your first payment and not an actual deposit in the usual sense.

How much is the average down payment?

If you’re planning on paying your premiums in full, you don’t have to worry about making a down payment. When you pay the full six-month premium or the full annual premium when you apply for your coverage, there won’t be a special minimum down payment that must be made to activate your policy while the application is being reviewed.

If you’re planning on setting up a payment arrangement so that you can make monthly or quarterly payments, you will have to submit an application that’s accompanied by a down payment. The amount that you’ll have to pay can vary.

Here are some of the common down payments that insurers charge:

  • The first two months must be paid when the policy takes effect
  • All monthly payments will be equal for the entire term
  • You’ll be asked to pay down a percentage of the entire policy premium

What happens after you submit your application and your first payment?


You can’t submit an application for coverage until after you’ve received quotes. After you have a quote and you know how much the coverage should cost you, the application is then accepted and sent to an underwriter.

Making a payment doesn’t mean that your rates will be locked in. The carrier still has to completely underwrite your application.

When an application is being underwritten, a representative employed by the company will start to run reports and look for inconsistencies in the answers you’ve given. If the reports show something you haven’t reported or there are further questions, the underwriter could ask for clarification.

It’s not until all the information is verified that the final rate is determined and the policy is set to be issued.

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Policies Can Be Rescinded if You Purposefully Lied

If you know you have infractions or accidents and you purposefully don’t disclose them, the carrier could do more than just cancel your policy. It’s possible that the company will make the business decision to rescind your coverage. It’s not common, but it’s an option the exists in extreme circumstances.

Rescinding policies is allowed when you’ve lied to the carrier or when you make fraudulent claims, meaning that the carrier dates the cancellation back to the policy’s effective date. No coverage is afforded, and ties are severed. Whatever you’ve paid into the policy will be refunded to you by check within a few days.

Can you cancel your policy if the rates change?


If you failed to list an old ticket and it was an innocent mistake, your policy won’t automatically be canceled. The carrier still might offer you coverage, but you’ll have to pay more than the amount that was estimated at first.

After you receive the final rate quote, you’ll get an invoice for the prorated increase that you need to pay to keep up your coverage.

If you’re not happy with the jump in your final rate, you do have the option to cancel the coverage. The cancellation won’t be backdated because coverage was afforded at first.

It can, however, take effect on the date that you contact the insurer. Most of the time the company will request you to ask for the cancellation in writing so there’s a record of it.

If you cancel after the policy is issued, will you get money back?

If you do cancel the policy before your next installment is due, you’re entitled to get some of your down payment back. The money that’s taken as a down payment is still used to bring your balance down.

Since it goes towards premiums and not other application fees, there will be money left over that would have paid the unearned premiums.

Will there be a fee to cancel?


No fee is charged if the carrier initiates the cancellation. If you voluntarily decide to cancel your policy before the term is up, you could be charged a fee. Some fees are only a few dollars, while others are a percentage of the balance owed on the total premium.

It’s very important to provide accurate information on your applications.

If you’re dishonest, it will catch up to you. Don’t just accept a rate increase without shopping around. Use an online quoting tool and then you can see if the final rate is reasonable.

To use our online quoting tool, simply enter your ZIP code now!

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