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Wouldn’t it be nice to pay less for home insurance? Saving money on homeowners insurance seems like a paradox. The buying process is muddled: Why does home insurance cost so much? How do you know you’re getting a fair price? What’s this deposit for?

We get it. This article will walk you through the purpose of a home insurance deposit and the alternatives available to you. We promise this to be pain-free.

Don’t forget to use Insurify to browse customized free quotes and explore your policy options. The perfect plan for you and your home has never been easier to find!

Home Insurance Deposit 101

A home insurance deposit is your good-faith payment for a home insurance policy. It’s the money you pay upfront— technically, once you’ve agreed to your insurance rate and are ready for underwriting. But this money contributes to your premium payment.

Most homeowners pay their premiums in twelve installments over a year. So in a way, each payment is like a deposit toward the full cost of annual coverage. What’s often called a deposit is simply the first payment for that policy.

What a Deposit Pays For

A home insurance deposit ensures that your home insurance coverage starts on a specific date. If you’re a new homeowner, that date will be on or before the closing date of your purchase. If this is for a new policy on an existing home, it begins the day your current homeowners policy ends. Or another day you set with your carrier.

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Avoiding the Deposit

Because the home insurance “deposit” is really just an installment toward your policy, there isn’t a way around paying that portion of your policy. You do have two other options:

  • Pay for your premium in full.

  • Pay your insurance through your mortgage lender.

The first option does mean that you’ll pay more upfront. However, you’ll likely pay less annually as most insurance companies offer a pay-in-full discount. But remember: that premium is good for one year. You’ll need to pay it again, so be sure to plan for that in your annual budget.

Your second alternative is a little more complicated, so let’s take a closer look.

Paying Homeowners Insurance Premiums Through Your Mortgage Lender

Most homeowners purchase their homes with the help of a mortgage lender. Some mortgage lenders offer homeowners the option of paying for other homeownership expenses, mainly property tax and/or home insurance, through their mortgage payment.

In this scenario, your monthly mortgage payment might look like this:

Payment TypeMonthly Cost
Property Tax$387
Home Insurance Premium$114
Total Paid Directly to Lender$1,722

The $501 a month to pay taxes and insurance are kept in what is known as an escrow account. This account is separate from your mortgage account, so you do not pay interest on this money.

The advantage of paying through your lender is that you can’t forget to pay for your insurance. This means you’ll never lapse in coverage, which would likely violate the rules of your lending agreement. Not to mention, if anything happened during that lapse in coverage, you would have to pay out of pocket for repairs.

The disadvantage of paying through your lender is that you won’t be paying as much attention to the cost. It also makes things a little trickier when you switch homeowners insurance.

Frequently Asked Questions About Cheap Home Insurance With No Deposit

  • For many, bundling insurance products results in big savings. Many insurance carriers offer discounts as much as 15 percent for multi-policy discounts., including:  Progressive State Farm Farmers Allstate Liberty Mutual Travelers Nationwide USAA And it doesn’t end with your car, your child’s renters insurance policy can also be bundled.  If it makes sense for you and your budget, there’s no reason your car insurance company can’t also be your home insurance company.

  • Flood insurance works like home insurance. You will pay for a portion of your annual premium when you agree to the policy. So while it may be called a deposit, this payment is more like paying the first bill for home insurance. Flood insurance differs in that it is backed by the National Flood Insurance Program, even if you pay the premiums with your insurance company.

  • The cheapest homeowners insurance depends on several factors. These are: Where you live The condition of your property Your credit score and credit history Safety features in your home Coverage limits Insurance claims history The discounts available to you Because everyone’s profile will be different, no one insurance provider is the cheapest for everyone.  That’s why it’s so important to review several home insurance quotes before you buy. And that’s why policyholders should review insurance quotes often, at least every twelve months. As your credit score improves, your premium could be lower. But your insurance company isn’t going to lower it for you as a courtesy. Wouldn’t that be nice?

Cheap Home Insurance Without a Deposit: The Bottom Line

If you want the affordable homeowners insurance, you’ll have to put in a little work by comparison shopping. Luckily that little work comes with a big payoff. You can easily save hundreds every year by simply checking if a competitor offers a lower rate.

Now that is nice.

Extra lucky for you is that you can use Insurify to shop, compare, and choose the homeowners insurance policy right for you!

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JJ Starr
JJ StarrInsurance Writer

J.J. Starr is a health and finance writer with a background in banking, lending, and financial advising. She holds a Series 6, FINRA, and life insurance licensure and a master's degree from New York University. Through her writing, she strives to use her decade of experience to help consumers make sound financial choices. Connect with J.J. on LinkedIn.