Down Payments Required for Florida Insurance Policies

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Sometimes people need to get insured in a hurry. Maybe they need to register and start using a long-dormant extra car again, or maybe they just missed a payment and accidentally let their insurance lapse. If they’re strapped for cash, they may want to get going with a policy that will cost them nothing to start up, but Floridians looking for a no down payment auto insurance policy will find that there may be a major road block: Florida law requires insurers to collect down payments from customers for policies they buy from a new insurer.

According to section 627.7295 of Florida’s statutes, a new policyholder must pay at least two months’ worth of premiums for a new policy in order to get insured legally, and this amount must come directly from their own pocket. If they were planning on going through a premium finance company to get the first few months covered, they’re out of luck.

“Insurers, agents, and premium finance companies are prohibited from advancing the down payment to the applicant or otherwise circumventing the requirement that the down payment come from the applicant,” according to a bill analysis from the Florida House Committee on Financial Services. This law has been in place since 1995.

​Exceptions to the Down-Payment Law

There is a handful of exceptions to the law. Here are the major ones:

— When the insurer issues car insurance primarily to active duty or former military personnel or their dependents

— When the policyholder or one of the policyholder’s family members is renewing or replacing a policy written by the same insurer

— When the policyholder or one of the policyholder’s family members already has a policy in effect and is just purchasing additional coverage or adding coverage for an additional vehicle from the same insurer

— When all payments are made through a payroll-deduction plan or through an automatic electronic funds transfer payment plan

​Why Require a Down Payment?

According to the committee analysis of the law, there are three main benefits of having the law.

First, it helps them enforce the state’s mandatory auto insurance law. Floridians need coverage to register their vehicles. And if they can get covered for absolutely no start-up costs, they might take advantage of the system by taking out a policy with no down payment, registering the vehicle, and then letting the coverage lapse when they fail to pay for it. Florida’s uninsured rate has been estimated by the Insurance Research Council to be around 24 percent, the fifth-highest rate in the nation, and lawmakers don’t want that going any higher.

Second, it helps ensure that insurers don’t lose money by being required to pay for any claims on a no-down-payment policy that they never collected any premiums on.

Third, it helps keep premium finance companies and insurers from establishing an unfair edge by offering zero-down policies.

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