Will a Disappearing Deductible Help You Save on Car Insurance?
Are the Savings Worth the Costs?
All it takes to see a disappearing deductible ad on television is to do a little channel-flipping. You’ll likely see several commercial advertisements and you may have even seen the Allstate commercial discussing a disappearing deductible. It seems that your insurance company is standing up and taking notice if you have a safe driving record. The concept sounds like a great way to save on the cost of car insurance, so let’s take a closer look and find out more about it and see if the disappearing deductible is as good of a deal as it sounds like in the commercial.
According to the International Risk Management Institute Inc. (IRMI), a disappearing deductible is “A formula deductible that decreases as the amount of loss increases and disappears entirely to provide full coverage when the loss reaches a specified amount. Disappearing deductibles were once commonly used in property insurance policies.” Basically, the longer you go without a claim, the lower your insurance deductible becomes. You are rewarded for safe driving and not being involved in an accident.
Who Offers Disappearing Deductibles?
A few insurance companies offer the disappearing deductible incentive, including Nationwide, The Hartford, Allstate and Liberty Mutual. Here is a little more information about how these programs work.
Nationwide Vanishing Deductible Program: For every year of accident-free driving, your deductible will be decreased by $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. If you are in an accident after building up credits, you don’t have to worry about your credits all being taken away.
For example, if you have had a safe driving record for three years and then have an accident, your deductible credit would be reduced to $100 instead of $300. The Nationwide vanishing deductible program will cost you approximately $60 per year on your auto insurance policy.
The Hartford Disappearing Deductible Program: With The Hartford’s Program, 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. With The Hartford’s plan, you must also not have any moving violations on your driving record within the last three years to qualify.
Allstate Deductible Rewards: The Allstate deductible rewards program is a little different from the other disappearing deductible programs. As soon as you sign up, you are immediately given $100 off your collision deductible. For every year you are accident-free, another $100 is deducted 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.
Liberty Mutual Deductible Fund: Liberty Mutual's program is called the "Liberty Mutual Deductible fund." It is not actually a disappearing deductible but rather allows you to save money toward your deductible. Liberty Mutual will also contribute to your deductible fund. Here's how it works. 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. For each year, the deductible savings goes up by $100 even though you contribute the same $30 each year. For year two, the savings is $200, for year three, the savings is $300, etc. The deductible fund never expires as long as you remain a Liberty Mutual customer.
What Is the Catch?
The disappearing deductible advantage is only offered to customers at an additional premium cost. The cost for taking advantage of this incentive offered to policyholders with safe driving records varies from company to company. It works in a similar way to the accident forgiveness incentive offered by many insurance companies.
Is the disappearing deductible a good deal? It depends on your driving record. Of course, if you have a less than perfect driving record you should not waste any money on a plan that will not result in insurance savings for you. It is 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. I would not choose a program where the deductible reverts to the original deductible. Accidents could happen to anyone at any time regardless of your driving record. In this case, after five years of building up to a $0 deductible, after one accident your deductible would again be $500. That is not a good deal. 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.