Do I need to pay a deposit for auto insurance?

You will need to pay a deposit for a new auto insurance policy. Policy deposits are normally calculated at 25% of the policy premium.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insuranc...

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Jul 14, 2021

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Things to remember...

  • New business customers usually will require a deposit payment
  • An insured should shop around in the market for the best payment terms
  • The risk you present to the insurer could dictate whether or not you have to pay a deposit

There are a lot of things about car insurance policies that the normal consumer simply would not know about.

These include things such as:

  • What a typical premium is
  • How that premium is calculated
  • What usual payment terms go along with the policy

These are all fair questions, but they also all have answers that you want to be aware of in order to be an educated consumer in the marketplace. This includes knowing whether or not you have to pay a deposit to get a car insurance policy.

The insurance industry is one of the most competitive markets in the world. This is a great thing for consumers because it means that you have the ability to really shop around, do price comparisons, and find the very best deal.

Compare now by entering your zip code above!

Payment Terms Variants

Payment terms truly are going to vary depending on the insurance carrier that you choose to go with.

Traditionally, as a new business customer for an insurer, you are probably going to be asked for a deposit before your coverage goes into effect.

While this is not always going to be a requirement, it is the rule of thumb that most insurers will go by.

The reason as to why insurers want to get that initial deposit from a new customer is so they know that the customer actually intends to pay the premium on their policy.

It is a deposit payment in good faith essentially for the insured to say to the insurer that they are buying the policy and they intend to pay the full premium and see it through.

This does not mean that a deposit is always going to be required, though. Some insurers, in an effort to get your business, will not require a deposit right out of the gate.

They may allow you to get a car insurance policy, have it be in effect for a month or so, all before they ever collect the first instalment of the premium.


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Renewals Are Different

A renewal policy is entirely different in the insurance world. When you come up for renewal with an insurer, you are rarely asked for a new deposit payment in order to secure the renewal.

The fact that the insurer wants to renew your policy, to begin with, means that they appreciate your business, you are a risk that is within their business appetite, and they know you are going to be paying the premium in full more than likely.

For these reasons, a renewal usually is not going to have you paying that deposit out front. The risk that you present to the insurer can also have an impact on whether or not a deposit is required on your part to get the policy into effect.

If you are a consumer who has a bad history with insurers and historically does not pay premiums in a timely fashion, then you may be asked to pay a deposit or even the full premium right up-front.

If you have a bad credit score or poor driving history, that could also be a signal that you are a higher risk and therefore a deposit is something that should be sought out.

The flip side of this is the consumer that has a perfect credit score and driving record.

Since you are going to be that much more desirable as a piece of business to insurers in the market, they may be more willing to waive a deposit requirement to get you under their book of business.

Understanding that you as a consumer hold a lot of power in the market is very important. You truly do have the ability to shop around, do price comparisons, and find not only a policy that suits your needs but payment terms that fit you as well.

Compare car insurance today and get the best coverage to fit your needs!


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Enter your ZIP code below to view companies that have cheap auto insurance rates.

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