American REIA Let’s say your vehicle suffered losses totaling $4500. Your insurance pays $4000, while you cover the remaining $500 out of pocket. This is how things usually go with deductibles, but there is a way to avoid making a dent in your wallet: opting for the diminishing deductible program.
Read on to learn about:
- Vanishing deductible and how it works.
- Top-tier vanishing deductible insurers.
- Vanishing deductible precautions and other ways to save on your auto insurance.
What is a Vanishing Deductible?
Unlike regular deductibles, vanishing (disappearing) deductibles – applied exclusively to comprehensive and collision coverage – can be reduced to $0 over time, meaning you won’t have to pay if a loss occurs, dodging the bullet of financial stress. Some auto insurance companies offer vanishing deductible programs as a stimulus to drive safely and avoid accidents.
How Do Vanishing Deductibles Work?
A vanishing deductible program works as follows:
- Each year you drive violation- and collision-free, your deductible decreases and can eventually disappear altogether.
Auto insurers award you deductible credits as soon as you sign up for the program, and some may even grant the first cost reduction at the end of the first year. The gradual decrease in the deductible can be a percentage of the deductible or a fixed sum, possibly depending on the required period of accident-free driving.
Is a Vanishing Deductible Worth It for You?
A vanishing deductible option may not suit those who don’t drive much or aren’t prone to major accidents. However, if you tend to file claims regularly and fear significant damage to your vehicle, adding a diminishing deductible option to your insurance policy can help you save money on your auto insurance claim.
A few additional factors dictate whether this is the solution for you, so it always makes sense to peruse your disappearing deductible program before committing to it.
Everything You Should Know Before Purchasing Your Vanishing Deductible
Deductibles Can Revert to Their Original Value
The big caveat that comes with vanishing deductibles is that after you’ve maintained a clean driving record for years and managed to diminish the cost to 0, it’s possible that as soon as you file a claim, your deductible can climb up to its original value, erasing all the time and effort you’ve dedicated. This downside isn’t universal but the one to keep in mind.
You May Not Save Money With Your Vanishing Deductible
Whether you save money depends on how likely you are to use your deductible, and your risk tolerance.
Here’s what you can do:
- Evaluate the probability of getting in an accident against the cost of the coverage. Although the cost of the feature is higher than the actual decrease in the deductible, it may or may not save you money over time. If you paid $30 extra for 12 months, amounting to $360 in total, and decreased your deductible by $100, you would lose $260 even if you filed a claim (as opposed to $360 if you didn’t file a claim).
You May Not Be Eligible for the Program
Some car insurance companies may require you – or even all drivers on the policy – to have a clean driving record (no at-fault accidents, convictions, or violations) for a few years before you can apply for the vanishing deductible program. What is and isn’t penalized usually depends on the insurance company.
Insurance Companies Offering Vanishing Deductible Programs
To get a better understanding of what a typical vanishing deductible program looks like, let’s examine the offers from a few insurance companies:
Allstate Deductible Rewards Program
Allstate grants $100 off the collision deductible just for signing up, subtracting $100 every year of collision-free driving. You can earn up to $500 off your deductible and reduce it to nothing in four years. No clean driving record is required to apply.
Nationwide Vanishing Deductible
Nationwide shrinks your deductible by $100 yearly as a reward for being a safe driver, with a maximum of $500. When you add this coverage to your policy, the initial $100 credit is applied after a month-long waiting period. Nationwide started offering their diminishing deductible option back in 2011, the year they released their vanishing deductible commercial.
The Nationwide vanishing deductible applies to both the collision and comprehensive deductibles, which separates it from other solutions. Accident-free driving history is not required to apply. Upon an accident, your deductible won’t return to its starting amount but will be set at $100.
Liberty Mutual’s Deductible Fund
Liberty Mutual Deductible Fund lowers your collision deductible by $100 for every year of accident-free driving, down to $0. Unlike other plans, the Liberty Mutual car insurance deductible program doesn’t charge more for additional vehicles, and a spotless driving record is not required to apply.
The Hartford Disappearing Deductible
The Hartford’s Advantage Plus Plan includes “Disappearing Deductible” as part of their package. Your collision deductible is instantly lowered by $150 and then by $50 each subsequent year of safe driving, potentially to $0. The fly in the ointment, though, is that The Hartford does require five years of accident-free driving, three of which must be with them, to qualify for the deductible.
More Ways to Save on Car Insurance
If you want to save money on auto insurance, but are unsure if a vanishing deductible program would be the right fit, we suggest you explore a few other solutions.
- Multiple Policy Discount. Customers with two or more insurance policies with the same insurer – for example, property and auto insurance – usually receive a discount.
- Multiple Vehicle Discount. Customers with two or more vehicles insured with the same insurer usually receive a discount.
- Accident Forgiveness. Accident forgiveness prevents your insurance rates from skyrocketing after the first at-fault accident. Besides, you can combine accident forgiveness and a vanishing deductible.
- Safe Driving Discount. Insurance companies encourage safe and low-risk driving, enabling discounts of up to 30% of the premium for those without driving-related mishaps or significant comprehensive insurance claims. Some insurers may grant you a discount even after a few insignificant traffic violations. However, to qualify for the discount, you must agree to attach a beacon device to your car to track your speed, location, and how you drive.
- Good Student Discount. If you have teens to insure or are a good student yourself – B or higher grades – you can apply for a good student discount to save on your premium. The eligibility proof will be your report card and a document signed by a school administrator.
As you can see, there are plenty of ways to save on your auto insurance, whether via a vanishing deductible or one of the conventional discounts. Make sure to research your options before committing to collision, comprehensive, or other auto insurance.
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