Do you get your deposit back from car insurance?
A car insurance deposit is part of an annual premium payment rather than a separate charge or fee. Read on to learn if there are times when your auto insurance deposit is refundable and what happens to your deposit if you cancel your plan.
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Joel Ohman
Certified Financial Planner
Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...
Certified Financial Planner
UPDATED: Dec 28, 2023
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Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from top car companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.
UPDATED: Dec 28, 2023
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident car insurance decisions. Comparison shopping should be easy. We are not affiliated with any one car insurance company and cannot guarantee quotes from any single company.
Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from top car companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
- An auto insurance deposit is not a separate charge or fee but goes towards your annual rates
- You can cancel your insurance early and expect to receive a refund of your unearned premiums
- An insurance company may treat a refund on a short rate basis and retain an additional amount for administrative expenses
If an insurance company has asked you for a deposit before issuing a policy, you may want to know if it’s refundable. You may be working on your finances or cash flow and wonder if the insurance company will return that payment when you start sending monthly installments. You can get insurance without a down payment, but cheap no deposit car insurance is hard to find, so avoiding a deposit is often not an option. To help answer your question about whether you can get that deposit back, we’ve investigated the subject and provided you with some information. (For more information, read our “Compare No-Deposit Car Insurance: Rates, Discounts, & Requirements“).
Is your car insurance deposit refundable?
An insurance company will apply your car insurance deposit towards the total cost of your annual insurance, and if you pay car insurance monthly, it will adjust each one to take this into account. Alternatively, your company may adjust or eliminate the final payment in your annual term instead.
Some insurance companies ask for a deposit so that it will not be out of pocket before you start making monthly payments. But this isn’t a standard approach across the marketplace. While some companies may not ask for a deposit at all, others may ask you to pay the first and last installments upfront.
How much will an auto insurance deposit be?
A deposit is usually a percentage of the total premium, and you should treat it as part of your annual insurance costs rather than a separate charge or fee. In other words, the insurance company does not keep it to one side to use if you default but applies it to your balance immediately.
You may want to check with your state to see if they limit the amount an insurance company can ask you to pay. Also, you might want to shop around to see if you can get better terms or a zero-deposit option. Some companies may decide to extend coverage to you without requesting a deposit to attract your business.
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Do you have a right to cancel car insurance?
You have the right to cancel your auto insurance if you are unhappy with the service or want to get your coverage elsewhere. You should typically write a car insurance cancellation letter to make this request.
Is an auto insurance deposit refundable if you cancel early?
You can expect to get a refund if any of the money paid to the company is “unearned.” As your insurance company will have blended your deposit into your monthly payments, you can expect any refund to be prorated.
What is short rate cancellation?
Some insurance companies will calculate any refund on a “short rate” basis. That means that a larger portion is retained of the premium than if it had been prorated. Insurance companies will take this approach to cover administrative expenses for policies that do not run for the entire term.
If you cancel your car insurance policy towards the beginning of the term, you may expect the company to retain more of the money you paid towards a deposit. You should ask your insurance company to explain its approach to deposit refunds. Ask a representative if the company favors a short rate, prorate, or a flat fee.
Remember that insurance companies must comply with each state’s bill of rights, which may cover the refund of any unearned premium.
Can you get a refund on a car insurance deposit if you stay with the carrier?
Your insurance company treats your deposit as part of your annual premium, so it will not make your car deposit refundable if you stay with the company for the entire term. Companies will use your refund to reduce the balance of your premium instead.
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Final Thoughts on Whether Your Auto Insurance Deposit Is Refundable
Companies treat your car insurance deposit as part of your annual premium rather than a separate charge or fee. You can ask your insurance company to refund any unearned premium if you cancel early. The company may prorate any refund or treat it on a short rate basis, where it may retain more to cover administrative expenses.
Case Studies: Retrieving Deposits from Car Insurance
Case Study 1: Policy Cancellation
John, a policyholder who decided to cancel his car insurance policy, had initially paid a deposit when he first obtained coverage. John wondered if he would be eligible to receive a refund of the deposit upon canceling his policy and whether any administrative fees or deductions would apply.
Case Study 2: Non-Usage of Coverage
Sarah, another policyholder, discovered that she did not need car insurance coverage for a specified period. Since her car was not in use during that time, Sarah decided to suspend her insurance policy temporarily. She inquired about the possibility of receiving a refund for the unused period of coverage and whether any conditions or fees would apply.
Case Study 3: No Claims Filed
Mike, a policyholder with a history of no insurance claims, decided to switch insurance providers. He wondered if he could retrieve the deposit made to his current insurance company since he had not filed any claims during the coverage period. Mike sought clarification on the refund process and any potential deductions.
Case Study 4: Early Termination
Samantha terminated her car insurance policy before the expiration date due to various personal reasons. Samantha was interested in knowing if she would be entitled to a refund of her deposit, considering the early termination and whether any penalties or fees would be deducted from the refund.
Readmore: How do I check my car insurance expiration date?
Frequently Asked Questions
Do you get your deposit back from car insurance?
Generally, car insurance policies do not require a deposit. However, some insurance companies may ask for an upfront payment or an initial premium payment. If you cancel your policy before the end of the policy term, you may be eligible for a refund of the unused portion of the premium. It’s important to review the terms and conditions of your specific insurance policy or consult with your insurance provider for accurate information regarding deposits and refunds.
Why do some insurance companies require a deposit for car insurance?
Insurance companies may require a deposit as a way to ensure that the policyholder will make timely premium payments. It acts as a form of security for the insurer in case the policyholder fails to pay their premiums. Additionally, it helps offset any administrative costs associated with setting up the policy.
How much is typically required as a deposit for car insurance?
The amount required as a deposit can vary depending on the insurance company and the specific policy. In some cases, it may be a percentage of the annual premium, while in others, it may be a fixed amount. It’s best to check with your insurance provider to determine the deposit amount required for your policy.
Is the deposit the same as the deductible in car insurance?
No, the deposit and deductible are not the same. The deposit is an upfront payment or initial premium required by some insurance companies, while the deductible is the amount you agree to pay out of pocket before your insurance coverage kicks in after filing a claim.
Can I get a refund of my deposit if I switch insurance companies?
Whether you can get a refund of your deposit when switching insurance companies depends on the specific terms and conditions of your policy. Some insurance companies may refund a portion of the deposit if you cancel your policy before its expiration date, while others may have non-refundable deposits. It’s important to review your policy or contact your insurance provider to understand their refund policies.
Are there any circumstances where the deposit is non-refundable?
Yes, there may be circumstances where the deposit is non-refundable. Some insurance companies have non-refundable deposit policies, meaning you won’t get the deposit back even if you cancel your policy before its expiration date. It’s crucial to review the terms and conditions of your specific policy or consult with your insurance provider to understand the deposit refundability accurately.
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Joel Ohman
Certified Financial Planner
Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...
Certified Financial Planner
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.