How Do Vanishing Deductibles Work?

Having a clean record can eliminate your deductible

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The concept of a "vanishing deductible" sounds like a great way to save on the cost of car insurance. After all, the lower your deductible, the less you'll have to pay out of pocket should you ever need to file a claim.

Learn whether a vanishing deductible is as good of a deal as it sounds and when it might be right for you.

Key Takeaways

  • Some insurance companies incentivize good driving by offering to lower—or even eliminate—your deductible.
  • The rules surrounding disappearing deductibles vary by company, but most come in the form of earned credits that you can use towards future claims.
  • Disappearing deductibles can be reversed if you fail to maintain a good driving record, or if you get in a severe and costly car accident.

What Is a Vanishing Deductible?

A vanishing or "disappearing" deductible is a way that insurance companies reward their customers for accident-free driving. Basically, the longer you go without a claim, the lower your insurance deductible becomes. Depending on your policy, your deductible may disappear altogether.

How Vanishing Deductibles Work

While dollar amounts and the time at which you earn your first credit vary among disappearing-deductible programs you'll typically find the same general parameters:

  • Earn a deductible credit immediately or at the end of the first year (usually $50-$100). The credit applies to both comprehensive and collision.
  • Every year you remain accident-free and major-violation free, with no policy lapses, you'll receive an additional credit (usually $50-$100).
  • Claims will automatically be settled using the deductible credit and the deductible credit will be reset. It has no cash value and the entire credit will be used in the event of a claim. You do not get to choose when to use your deductible credit.
  • As long as the feature is active, the vanishing deductible credit will never go below $100. If the feature is removed; the earned credit is reset to $0.

Who Offers Disappearing Deductibles?

A few insurance companies offer the disappearing deductible incentive, including Nationwide, The Hartford, Allstate, and Liberty Mutual. Learn more about how the disappearing deductibles work at each of these companies.

Nationwide Vanishing Deductible Program

Thirty days after you sign up, Nationwide gives you your first $100 deductible credit. For every year of accident-free driving after the first year, your deductible will drop by another $100. The program can be used to decrease your deductible for up to $500. This could leave you with no deductible at all, helping you manage your insurance and repair costs and save money.

The vanishing deductible is an optional feature with Nationwide Insurance. The details and availability can vary from state to state. After an accident, Nationwide will reset your deductible credit to $100.

The Hartford Disappearing Deductible Program

The Hartford offers auto insurance and the Disappearing Deductible program through AARP. For every year you are accident-free, your premium goes down by $50.

Your deductible will continue to decrease by $50 every year you are accident-free. Eventually, you could have no deductible at all. For most states, you must not have any moving violations on your driving record within the past three years to qualify.

The Hartford's disappearing deductible program is not available to California policyholders, and New York policyholders can only reduce their deductible down to $100, and no less.

Allstate Deductible Rewards

The day you sign up for Allstate's vanishing deductible, you'll receive $100 off your collision deductible. For every year you are accident-free, another $100 is cut from your deductible. You can accumulate up to $500 off your auto insurance deductible.

However, with Allstate’s program, if you do have an accident, the deductible reverts back to the original deductible amount. The deductible rewards discount is only available through the gold and platinum policy packages, and it's not available in every state.

Liberty Mutual Deductible Fund

Liberty Mutual's program is called the Liberty Mutual Deductible Fund. It is not actually a disappearing deductible; rather, it allows you to save money toward your deductible. Liberty Mutual will also contribute to your deductible fund.

When you enroll, you contribute $30 toward your deductible for the first year and Liberty Mutual contributes $70 giving you a total of $100 toward your deductible.

Every year after that, your deductible savings goes up by $100 via your $30 deposit and Liberty Mutual's $70 deposit. The deductible fund continues to grow even after five years.

Most disappearing deductible programs are not absolute, and they may lapse or be recalled if you fail to hold up your end of the bargain. Be sure to check with your insurance company for details.

Is a Vanishing Deductible Worth It?

It's possible to save money on a deductible if you have a perfect driving record. You will have to do the math to figure out if the amount of money you save on your deductible is worth the cost of the program.

But it's important to remember that accidents could happen to anyone at any time, regardless of your driving record. In programs where the deductible reverts back to the original, it could undo a lot of hard work in a very short time.

After five years of building to a $0 deductible, one accident could cause your deductible to go up to $500 again. That may not be the best deal for you.

Ask your own insurance provider if it offers a disappearing deductible program, and get all the details to find out if it is a good deal for you.