What is a down payment for auto insurance?

A down payment is a deposit you give to your auto insurance company to get the policy coverage to go into effect. The amount varies from company to company.

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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 Reviews.com and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Oct 20, 2021

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Things to remember...

  • Insurance carriers will have different deposit requirements for their policies
  • The deposit is typically what allows your insurance policy to go into effect
  • Shop around to get a deposit and payment terms you are comfortable with

The process of buying car insurance has never been easier for so many of our thanks to the arrival of the online presence of so many insurance carriers. Now we have the ability to hop online at any time and get quotes from a variety of different insurance carriers with a few clicks of the mouse

We have the ability to quickly and easily compare what they are offering in terms of coverages, we can look up reviews on customer service, and move right to the point where we want to have an actual policy bound.

Once you have made the decision to bind a policy with a particular insurance carrier, the next step is the payment terms. You have to agree with your insurance carrier in terms of what payment agreement you want to go with. Some insurance carriers will require you to put a down payment on your policy.

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As a matter of fact, many will require this. What exactly does this down payment do for you though in terms of your actual car insurance policy?

The Down Payment Gives You Coverage

The down payment is the good faith deposit that you are giving to your insurance carrier in most cases to help to get the policy coverage to go into effect.

Most insurance carriers have to issue selling you a policy, but they also want to be sure that they have a good chance of actually collecting the premium that they are charging for the policy. This is where the down payment comes into play.

Once you have reached the point where you want to bind coverage with a particular insurance carrier, they will likely dictate to you what down payment they want.

Once they receive that down payment, it is then that your insurance policy and the coverage associated with it will actually go into effect. This is important to pay attention to as an insurance consumer.

Failing to put out the down payment could result in your policy coverage never actually being activated.


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Giving the Carrier Assurance You Will Pay

Insurance carriers want to know that they have customers that are willing to pay for their insurance policies and are not just looking for free coverage.

So many insurance consumers out there will try to game the system and sign on with insurance carriers, never with the intent to pay.

The deposit helps to protect insurance carriers from this. They know that once you pay your deposit, you are likely going to be a good customer that is going to keep on paying.

The more that insurance carriers can gain paying new business customers, the better shape they are going to be in. This is how they are able to offer such competitive rates and quality coverage options.

The more that they are able to guarantee themselves that they will actually be able to collect on premium, the lower they are going to be able to go with their actual insurance rates across the board.

The deposit for your new car insurance policy is simply the initial payment that you are going to be making to your carrier to have your policy coverage go into effect.

The amount of the deposit is going to vary from insurance carrier to insurance carrier.

You will want to be sure to shop around and see what the competitors are offering in the market before you make a sound decision.

You want terms for your insurance policy that are going to be beneficial to you and having a deposit you are comfortable paying for up-front is the first step in this process.

Enter your ZIP code now to find auto insurance that fits your budget.


  1. https://www.geico.com/commercial-auto-insurance/

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