When you sign up for an auto insurance policy, you may be asked to pay a deposit or down payment. But do you get deposits back from car insurance when you cancel?
The reality is that you won’t usually get this deposit back, but there may be situations when you do.
If you’re thinking about canceling your insurance because you’re looking to buy new coverage, we’ve carefully reviewed some of the best auto insurance providers and have information on them below. Just enter your zip code to get started comparing free quotes from local auto insurance providers.
Auto Insurance Deposits: Overview
When you initially sign up for auto insurance, your provider may ask you to pay a deposit or make an insurance down payment. These are interchangeable terms for the same thing.
Why Do Insurers Want a Deposit?
The main goal behind the deposit is to ensure that you make a payment to the insurer before it begins providing coverage. This reduces the provider’s risk, as it means it will have received some money from you before you have an opportunity to file a claim.
However, this deposit is not like a security deposit that policyholders can expect to get back. Instead, it works more like a down payment that counts toward your annual premium. If you pay monthly, the amount you initially pay in that deposit will be divided by 12. That amount will then be subtracted from what you must pay each month.
What are the Requirements with Deposits?
Every insurance company will have a slightly different requirement for a deposit. Here are some possibilities:
- Some may require a percentage of your annual fee.
- Others may require you to pay your first month ahead of time.
- Others require you to pay the first and the last month.
Because each company does this differently, you will be wise to pay careful attention to your chosen provider’s requirements.
When You Don’t Need a Deposit
Some auto insurance providers simply don’t require a deposit, but this rarely is the case. As mentioned, offering you coverage without any upfront payment would be risky for any company, as you could file a claim before you pay anything.
You may be able to avoid a deposit if all the following applies to you:
- You have a good driving record.
- You’re willing to pay higher monthly premiums.
- Your chosen auto insurer permits it.
Even so, your insurer is likely to require you to pay the first month’s premium.
How Can You Avoid a Deposit?
The best way to avoid a deposit is to pay your premium in full. When you do this, you will pay the entire year of premiums and not have to make monthly payments. You may not have to pay an additional deposit because the insurance provider already has money from you. Some car insurance companies even give you a discount for paying your premiums in full.
What Happens to the Auto Insurance Deposit If I Cancel?
In most cases, nothing happens to your auto insurance deposit if you cancel. It is simply forfeited, and the insurance company gets to keep it. After all, the deposit is just like the other insurance premiums that you paid.
Will I Get a Refund on My Car Insurance Premiums?
Depending on your insurance company, you may get a partial refund on your premiums if you cancel, potentially including the deposit or part of it. The size of the refund depends on your billing method and if you paid in full or in monthly installments.
What About Prorated Insurance Refunds?
If you pay your premium every month, you may get a prorated refund for the remaining portion of the current month. However, you may commonly get this in the form of a credit instead of a refund. So, you may only be able to use it if you sign with the company in the future.
If you paid the full year of premiums and need to cancel, you may receive at least a portion of the premiums from the unused months. Depending on your insurance company, they may keep one or two months’ worth of premiums.
In either case, your insurer may charge a cancellation fee and subtract that from the refund you will get. If you have any other questions, you can contact your insurance agent.
Our Recommendations for Auto Insurance
When searching for cheap car insurance, we strongly suggest you consider GEICO, USAA or State Farm. No matter which provider you decide to go with, the best way to compare car insurance rates is with a free comparison tool. Our quote box only requires your zip code to get you started.
GEICO: Best Overall
In our expert analysis, GEICO earned an overall rating of 9.1 out of 10. While offering multiple discount opportunities, GEICO lets you supplement your regular auto insurance with rental reimbursement, classic car coverage, rideshare coverage and more. Some savings opportunities from GEICO include safe driver discounts and federal employee discounts.
USAA: Best Military Provider
USAA earned an impressive 9.6 overall rating for its strong customer service standards and affordable insurance costs. As you decide what coverage you want from USAA, consider extras like classic car insurance, accident forgiveness and rental reimbursement. Keep in mind that USAA is only available to active military, veterans and their families.
State Farm: Best Student Discounts
State Farm earned a 9.1 rating out of 10 and is known to provide some of the highest discounts for students and young drivers. State Farm’s Steer Clear® program is great for drivers under 25 to save money on premiums. You can also add rideshare coverage, classic car insurance, roadside assistance or travel expense coverage to your car insurance policy.
FAQ: Do You Get Deposits Back from Car Insurance?
Will I get money back if I cancel my car insurance?
Getting your money back will depend on your insurance provider, but you shouldn’t expect to get a full refund. You may only get a prorated refund if you’ve already paid for the term in full, but you may not receive this for the final two months of the policy term. If you pay monthly, you probably won’t get a refund for the current month. Policies vary by company, so always read your contract carefully before canceling.
How long does it take to get insurance money back?
How long it takes to get insurance money back will vary by insurance company, but most will return your premiums within two to four weeks.
Can I leave my car insurance early?
Yes, you can cancel your current auto insurance policy any time you wish. However, your insurer may charge cancellation fees in the case of premiums paid monthly. If you paid your premiums in full at signup, you may not receive a full refund. Also make sure you have continuous coverage for as long as you have a car. Lapses in coverage while driving is illegal and can raise your future premiums.
What is an insurance premium refund?
An insurance premium refund is when your insurance company pays you back the annual premium that you paid ahead of time, whether in part or in full. For auto insurance, expect the insurer to deduct cancellation fees from the refund you expect to receive.
Methodology
The Detroit Bureau collects data from every major car insurance provider to formulate rankings of the best insurers. Our in-depth rating system takes into account market share, coverage, auto insurance rate estimates generated by Quadrant Information Services, customer satisfaction and ratings from industry experts. Each insurer is given a weighted score in four categories, as well as an overall score out of 10.0.
We recommend auto insurance companies based on these rankings, but we also encourage you to perform your own research and compare quotes to find the best coverage.
