The law requires all motorists to have auto insurance. This allows the insured to receive the necessary care in the event of an accident without being overburdened by hospital costs. Before offering their services to those who wish to do so, some insurers require a down payment from clients. What is the point of paying a deposit to insurers?
Why do insurers require a deposit from new customers?
A deposit is the payment of a given sum defined by the insurer and that the insured must pay. It actually constitutes part of the contributions. This payment takes place after signing the insurance contract and commits both the insured and the insurer. Most insurers ask for this payment because it is a form of security for them.
By paying your deposit, you make a psychological commitment to the insurer and are no longer tempted to turn back in full collaboration. For example, a customer who has to pay a considerable amount for the down payment will not be able to reverse his decision during the execution of the contract, because he risks losing his money. A deposit is only refundable by mutual agreement between each party.
By paying your deposit, you are showing the insurer that you are a reliable and trustworthy person. Thus, the insurance company does not fear being confronted with the worries of losses and unpaid invoices. It is therefore a guarantee of professionalism and seriousness on your part.
What are the advantages of paying your auto insurance deposit?
The deposit you pay after signing an insurance contract binds you to the insurer. The main role of a down payment is that it is used to automatically activate your auto insurance. In the event of an accident, you are guaranteed to be covered by your insurance. Your insurance will therefore intervene to cover the costs related to the damage caused. You, therefore, benefit from all the privileges offered by the insurer upon payment of the deposit.
From an economic point of view, you have every interest in advancing the amount requested by your insurer at the risk of paying much more during your future monthly contributions. Since the down payment is actually only part of your annual fee, if you don’t pay it, the insurer spreads that amount evenly over subsequent months. Here is a small example to illustrate the situation.
From January 1, the owner of a car agrees with an insurance company to pay a contribution of up to €100 per month. The contract is considered to be valid only for a period of one year. If the owner of the vehicle begins his first payment on March 1, he will be required to pay a sum of €120 after the remaining 10 months (including the month of March).
This situation could become very embarrassing after a few months if your finances are not stable. In this case, your auto insurance contract will be terminated and the insurer could label you the unreliable and insecure customer. Other insurance companies may therefore refuse to take charge of you.
On the other hand, if you had made a deposit of €200 for the first two months, you will be more comfortable managing your finances.