Insurance - is it possible?
It's fascinating how a search
term for something that simply doesn't exist has become so popular!
No deposit car insurance apparently is something that thousands of
people type into Google every week and there is no shortage of
websites that advertise it.
The fact is that it simply isn't legal. The reason for this is a
very old part of our British law of contract. An insurance policy is
a contract between insurer and the insured; and for it to be valid
each of them has to have what is called a consideration. This means
they both have to get something out of it for it to be binding. In
the case of a car policy the motorist gets protection from having to
pay out for most, if not all, of the damage to property or life and
limb that may be caused by a road traffic accident, and in exchange
for that the insurance company gets a premium. No premium, no
contract. No contract, no obligation for the insurance company to
This means that something, even if it is a fairly small sum, has to
be paid over on account to the insurer. This doesn't have to be a
substantial amount but it has been generally accepted that around 10
percent at least should be handed over.
There was a time only a couple of years ago when small deposits like
this were quite common. Unfortunately, however, too many people were
finding the regular payments to be a financial strain, and the
default rate got too high.
A lot of insurers will still accept monthly payments for their
policies; you can find these by visiting websites such as
Insurers love statistics, they are what they base nearly all their
decisions on. They found that statistically the younger an applicant
was, the more likely that applicant was to fail to make all due
payments. This means that it is extremely unlikely that anyone under
the age of 25 would be able to get away with a deposit of less than
about 20 percent of the total premium. Conversely, over 50s were
found to have a good record and so there are some policies available
which require an upfront payment of less than 10 percent!
There are commercial considerations to bear in mind as well. Someone
who wants to buy an expensive car insurance policy, but cannot
put down any money at all upfront, will probably be someone who will
find all the other repayments extremely difficult as well! Insurers
do carry out credit checks on applicants who wish to buy insurance
in this way, and sadly a high proportion have to be turned down
because of a poor credit record.
A number of insurers, who have traditionally offered the very best
bargains in insurance, will only accept applicants who will pay for
the full premium in advance. This cuts down the choices for those
who want to pay monthly quite dramatically, and means that they
almost invariably end up paying more for their policies than those
who can afford to pay in advance. It is the old story; the more
money you have, the less you need.
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