How Does a Down Payment for Auto Insurance Work
Consumers are always looking for ways to keep the family budget balanced. “How does a down payment for auto insurance work?” it is a particularly timely question for people who don’t want to or can’t afford to pay their auto insurance premium in a lump sum.
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The down payment that an auto insurance buyer makes is usually the first month’s premium. The company may require the driver to pay a bit more than this amount initially, and the extra money maybe an administrative fee for the cost of gathering the applicant’s information and issuing the policy. A new customer will still need to go through the underwriting process, where the insurance company examines his or her driving record and other personal information in detail. The insurance company has a certain amount of time during which it can cancel any new policyholders coverage and provide a refund for any unused premium paid.
Auto Insurance Payment Options
Each auto insurance provider establishes its own auto insurance payment options for policyholders. The following are examples which may be available from different providers:
- Pay the full amount at once
- Budget payment which divides the premium into two installments; the first one due immediately and the second one within 30 days
- Monthly withdrawal from a checking account on a specified date
Some auto insurance companies allow drivers to pay their premium in three, four, five or six installments. The greater the number of installment payments, the lower the amount each payment will be.
Policyholders who choose to split their payments up will be paying more over the term of the policy then drivers to pay all at once. The insurance company will probably add an administration fee to each payment, which adds to the total cost of coverage.
In the case of the driver paying monthly, the annual administration fee may be a percentage of the premium which is divided by 12 and then added onto the monthly payment. For many consumers who choose to pay their auto insurance premiums monthly, the additional cost is a price they are willing to pay for the convenience of being able to manage their premium costs in this way.
Down Payment for Auto Insurance Premiums
New customers will need to pay the first month in advance to have their coverage put in place. Since an auto insurance policy is a contract between the insurance provider and the policyholder, the driver will need to pay the company some money to make it legally binding.
Drivers who are looking for coverage online can pay their down payment by credit card or another accepted payment method when they buy a new policy. The insurance company will issue a receipt and provide a temporary insurance card. The card should be placed in the vehicle and kept there until the policy documents and permanent insurance card are forwarded to the policyholder by mail. In the meantime, the temporary card can be used if the driver if the driver is involved in an accident.