Vanishing deductible: what is it? Do you need it?
A vanishing deductible for car insurance refers to a program in which your car insurance deductible will decrease each year you've been accident-free. For example, if you have a $500 deductible and have been accident-free for five years, your deductible would drop to $0 if you participate in this program. Because this coverage can vary by which car insurance company you choose, we decided to break down some common programs. Let’s get started!
Vanishing deductibles in auto insurance — table of contents:
- Nationwide
- Allstate
- The Hartford
- Liberty Mutual
- Vanishing deductible vs accident forgiveness
- Is it worth it?
Nationwide
Nationwide’s vanishing deductible program fits our first example pretty well. For every year you’ve been accident-free, your deductible will decrease by $100. Moreover, if you’ve had an accident, your deductible discount will reset back to $100 — not the full price. The only caveat with this program is it limits your savings to $500 — meaning, after five years of accident-free driving, you’re no longer eligible for any additional savings. So, if your deductible is $1,000, you’d still be paying $500 if you were to file a claim after five years of accident-free driving. Unlike other programs, Nationwide’s disappearing deductible applies to comprehensive and collision coverage and does not require any years of accident-free driving.
Allstate
Allstate groups its disappearing deductible into a program called “Allstate Deductible Rewards.” This program offers a $100 bonus just for signing up. After this, you can receive $100 off your car insurance deductible for every year of safe driving. Like Nationwide, this will cap at $500 in savings. But because you immediately get the $100, it will take only four years to get to a $0 deductible, if that’s your end goal. Plus, you do not need to have an accident-free past in order to qualify for this insurance policy — unlike our next company, The Hartford.
Read our review of Allstate, written by an expert!
The Hartford
The Hartford's disappearing deductible is a little different than other companies. First, you need to have five years of accident-free driving, and three of those years need to be with The Hartford. If you qualify for this, your collision deductible will reduce by $150. Each additional year after the five years will be met by a $50 reduction from your deductible amount. This program is only available through The Hartford's Advantage Plus package.
Learn more about this company's coverage options and more in our review of The Hartford.
Liberty Mutual
Liberty Mutual’s disappearing deductible program is called a Deductible Fund and they market it almost like a bank account. Upon signing up for the deductible fund, you earn $100 in the “deductible fund” account which goes to your collision deductible if you file a claim. Then, like other policies, your deductible decreases by $100 each year you haven’t had an accident until your car insurance deductible is $0. Unlike The Hartford, you do not need to be accident-free in order to qualify for this program.
Vanishing deductible versus accident forgiveness
Vanishing deductibles and accident forgiveness are often grouped together in optional auto policy packages by car insurance companies despite meaning different things. Accident forgiveness doesn’t have anything to do with your car insurance deductible, but rather the higher premium that comes after an at-fault accident. With accident forgiveness, your first at-fault accident is “forgiven” i.e., you’re not penalized for it. While the exact specifications vary by company, it can save you from the average $767 premium increase from an at-fault accident.
The reason these two are often grouped together is because of what they allow you to do: zero out the cost of getting into an accident. With a vanished deductible, you eliminate the only cost you would pay after filing a claim and with accident forgiveness, any residual consequences (such as an insurance rate increase) are also eliminated. In theory, the two work together to eliminate any short and long term effects of an insurance claim.
Is it worth it?
The phrase, “is it worth it?” is a pretty personal question regardless of what the “it” is describing. But, in order to really see if this vanishing deductible policy is worth it, you should consider some questions if you’re thinking of adding this type of policy.
How much does it increase your car insurance?
This will depend on every detail of your policy so it’s impossible to give an estimate. But you can guarantee that this additional policy option will increase your insurance premium.
- How likely are you to use your deductible?
- Is the additional premium for this policy option cost more or less than your deductible?
There's a couple of ways to think about this. If you have a new car or leased vehicle, you might be more willing to use your deductible in order to keep your vehicle in good condition. In many lease agreements, it actually stipulates what kind of condition you must return the vehicle in. If you have a new vehicle that you might want to sell in the future, it's in your best interest to maintain its condition to get a higher resell value. Another reason you might be more likely to file a claim is if you have teenagers. Teens are the most expensive drivers to insure because of the risk they present to insurance companies. They're more likely than any other age group to get into an accident. Because of this, you might want a lower deductible.
Does it cost more if you have multiple vehicles?
Ask a representative of your insurance provider if having multiple vehicles causes the additional cost to be higher than only having one.
Does every member need to have a spotless record in order to qualify?
If you have The Hartford insurance, you’re required to have five years of accident-free driving in order to qualify for this program. However, that's not across the board. Ask your auto insurance company if everyone needs to have a clean record or just the policyholder.
Does a "clean driving record" include moving violations, tickets, or any other citations?
The companies we examined were intentionally vague regarding what a “clean driving record” is. Ask your company if it refers to collision-type claims, or extends to other citations such as speeding tickets, DUIs, or other violations.
Does it apply to your comprehensive deductible?
Nationwide is the only company that extends this to your collision and comprehensive coverage. Comprehensive provides physical coverage to your vehicle against things other than collision. So, this means any damage done to your car by vandalism, animals, theft, or weather-related events.
The reason for this discrepancy might be the way insurance companies charge for comprehensive and collision claims. Usually, comprehensive-type claims do not raise your premium because they consider these claims not to be the result of human error. Collision claims, however, are usually charged as at-fault accidents and thus can be immensely impactful on your car insurance premium. In this sense, companies wouldn't extend this program to comprehensive claims because they wouldn't make up any costs by rate increases. Consider if this is something you are okay with.
Does your state prohibit this?
Your insurance is subject to state regulations as well as company-specific regulations. Meaning, not every state will allow this practice.
Still with us?
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