What are No
Deposit, Short-term, and Pay-as-you-go Insurance Policies?
If you live in the UK, you may
be asking what No Deposit, Short-term, and Pay-as-you-go insurance
policies are. You may be a bit confused by these three types of
cover, because they are very similar to each other. Many people even
think that no deposit, short term, and pay-as-you-go are just
different names for the exact same type of policy. However, there
are a few differences that you should know about, so you won't
purchase the wrong type of motor insurance cover.
No Deposit Insurance
No Deposit Car Insurance is a
fairly new insurance scheme in the UK. Due to being a fairly new
concept in the UK, only a few insurance companies offer a truly
deposit free policy. However, despite being fairly new and harder to
find, No Deposit Insurance is becoming very popular among consumers.
Consumers like the no deposit scheme because although they can be
paid monthly they do not require an extra upfront deposit like most
standard annual policies do. Although the policy is still a yearly
contract, the premium can usually be spread out over 6, or 12
instalments. Most No Deposit policies can be set up as automatic
debit bill payments, or can easily be paid for with a bank debit or
No Deposit Insurance offers the consumer a chance to retain more
cash flow control, since they can choose when and how to make their
premium payments. It also makes it easier for the consumer to cancel
or modify their policies, or change to another insurance company.
Since the premium has not been paid in one lump sum, the consumer
can cancel a policy without having to wait a long time for a premium
refund; do bear in mind however that insurers can charge quite
heavily for cancellation so always read the terms and conditions
However, since insurers normally make their money by investing the
interest made off premiums, they are hesitant to offer no deposit
cover. The instalment payment plans create a bigger risk to
insurers, as this makes it easier for the customer to skip out on
premium payments. So despite the popular assumption that No Deposit
Insurance coverage is cheaper than the standard annual premium, it
usually is not. The insurer simply charges more for various other
services rather than charging an upfront deposit. You would still be
considered to be in the same insurance group with all the same risk
factors as if you were paying a standard annual premium.
Short Term Motor Insurance
Short Term motor insurance is
also popular in the UK and usually doesn't require an upfront
deposit. Short term policies are for providing coverage for a set
amount of time usually ranging from one to twenty-eight days. Thus,
Short Term insurance lets you be more specific about whether you
wish to continue the coverage from month to month, just like No
Deposit and Pay-As-You-Go policies do. However, the longer you
purchase Short Term cover for, the less economical they become.
Short Term Insurance is good to use if you are temporarily using a
vehicle. For instance, short term cover is good for when your car
breaks down and you have to borrow or rent a car from someone for a
day, week, or month. It's also good for if you want to fill in a
gap between motor policies or so you can take more time to do some
in-depth comparison shopping for the best deal. Short term insurance
is also great way of covering family members who don't drive very
often, and just need cover for the days they do drive on.
Pay-As-You-Go Insurance is
also becoming very popular among UK drivers. It too permits the
consumer to retain more cash flow control of money normally used for
insurance premiums. This type of cover also offers the ease of
setting up payment plans and cancelling or modifying the policy.
Just like No Deposit and Short Term insurance cover, no upfront
deposit is usually required.
However, the consumer should be aware that there are actually two
primary types of Pay-As-You-Go Insurance. One type is a monthly
contract instead of a yearly or bi-yearly contract. This type of
Pay-As-You-Go cover is usually used by students and other drivers
who cannot afford to purchase the standard yearly coverage due to
poor economic conditions. As with Short Term insurance, this type of
Pay-As-You-Go Insurance becomes less economically feasible the
longer you purchase it for.
The other primary type of Pay-As-You-Go insurance is more commonly
used by people who don't drive very often or very far. This type
of coverage can be a monthly, bi-yearly, or yearly contract. It
usually requires some type of monitoring device to be installed into
the vehicle. Then the premium rates are based on how the vehicle is
actually used. If the vehicle is driven more frequently than what
was originally agreed to, the insurer can void the insurance
contract or charge more for the policy.
Whether you purchase Standard
Yearly, No Deposit, Short Term, or Pay-As-You-Go coverage, you
should always do some comparison shopping. Doing some in-depth
comparison shopping can possibly save you money, time, and hassles
later on. Recent surveys have revealed that 85% of UK drivers are
paying too much for their current insurance cover, simply because
they didn't shop around for better deals.
Nowadays, the internet makes it fairly easy to do some comparison
shopping. There are many insurance comparison web sites available,
and most of the reputable insurers now offer online services too.
You should visit at least two comparison sites in insurers'
websites in order to get a wider selection of offers. Many insurers
even offer a discount just for buying the cover online. However,
just be sure you know what each type of policy is being offered and
what the benefits and drawbacks are for each type. Now that you know
what No Deposit, Short Term, and Pay-As-You-Go Insurance policies
are, you can more easily determine which fits yours needs best.
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