Does no deposit car insurance really exist?
I'm afraid not. It is mandatory under UK law that some payment is made before a car insurance policy can be issued. This is made clear by the more ethical car insurance companies that offer monthly paid policies, such as confused.com or lowdepositcarinsurance.org.uk.
Car insurance premiums are worked out on a yearly basis. You usually, but not always, are given a choice of paying the whole lot upfront, or making regular payments over the next year or so with a suitable payment in advance. This payment usually varies between 1/12 of the total premium, and one fifth.
Why do I see no deposit car insurance advertised?
It is simply a marketing exercise that some websites exploit.
When do the payments begin for a policy?
You would have to make the first payment immediately, or at least before the policy came into effect. The next payment would normally be due one month later.
How does paying monthly work?
In effect you borrow the premium. This is either put up by the insurance company itself, or by a lender that they cooperate with.
Can I cancel the policy?
You are entitled to cancel any policy at any time. However the insurance company may well be entitled to claim more money from you at the time of cancellation. This should be spelt out in their policy documentation.
Can I stop paying for the policy?
You cannot simply stop paying whenever you wish. You're entitled to cancel the policy, as mentioned above, but you have to bear in mind that there may still be payments to be made even after the policy has been terminated. If you just stop paying the insurance company will almost certainly chase you for the balance, and this could end up in court with subsequent damage to your credit rating.
Does it cost more to pay in this way?
Almost inevitably, there are interest charges which will push up the total amount that you have to pay.
Does paying monthly affect my credit rating?
If you make all the payments as they fall due you may well find that your credit rating is improved. Conversely if you fail to make these payments satisfactorily you could find that your credit rating is adversely affected. This could make it more difficult in the future for you to get loans, credit cards or even a mortgage so it is important that you make sure that you can afford the repayments before entering into any commitments.
Are there any other drawbacks to pay monthly?
Yes. Some insurers only accept payment in advance. This means that you will have fewer choices when you shop around for quotations, and you may find cheaper quotes that you cannot accept because the insurer will not allow month-to-month repayments.