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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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Written by Laura Berry
Former Insurance Agent Laura Berry

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. Jo...

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Reviewed by Joel Ohman
Founder & CFP® Joel Ohman

UPDATED: Jun 24, 2022

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Here's what you should know

  • 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.

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.

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