How Do Vanishing Deductibles Work?

Piggy bank broken open by hammer
Stewart Waller / Getty Images

More and more insurance companies are starting to offer vanishing deductibles. The commercials are endless, and really don't give much information. The theory behind vanishing deductibles is that it is a reward for good drivers. If you go a year accident-free, your deductible will decrease $50-$100. Let's look a little closer at this extra insurance coverage to see if it's worthwhile for the average car owner.

How It Works

  • Earn a $100 deductible credit immediately
  • The credit applies to both comprehensive and collision
  • Every year you remain accident and major violation free, with no policy lapses, you will receive an additional $100 credit (maximum of $500 credit)
  • Claims will automatically be settled using the deductible credit and the deductible credit will be reset to $100. 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, it is not bankable
  • 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.

Benefits

  • Reduced out of pocket expenses - you will always have at least $100 deductible credit
  • Loyalty and safe driving will result in additional deductible savings
  • Opportunity to select higher deductibles and save on total policy premium

    Vanishing Deductibles Are Not Free

    Allstate's and Nationwide's TV commercials advertise the benefits of a disappearing deductible; however, they fail to mention you have to request the coverage and pay a fee to get it. I have to acknowledge the advertisements are deceiving. If you call for a quote from Allstate or Nationwide you might assume from the advertisements that the coverage is automatically included in all of their policies.

    Well, sorry to burst your bubble, but you have to request it and pay extra to get it.

    The cost can vary based on how many full coverage vehicles you own. But to give an example, let's just say it would be $5 more a month for the vanishing deductible. At $5 a month, for 12 months, you just paid $60 for a $100 credit that you may or may not use.

    I think you are better off saving your money for the deductible on your own. Saving sixty dollars a year with potentially no claim to file is a better deal. People are fixated with the idea of low monthly installments vs. paying out a large lump sum. Saving money is a skill you have to work on regularly. If you struggle with saving a nest egg, this option might make sense. Just remember, it is not a free perk. 

    Shopping for Car Insurance

    When it is time to shop for car insurance, keep vanishing deductibles in mind. It is a personal choice if you would like to go with it. But you do not want to compare another company who does not offer the coverage by price. Check the price with the same coverage on each then add on vanishing deductible if it is available.

    More Help With Deductibles

    Deductibles can be confusing. Whether they are vanishing or not the questions can be endless.

    Get to know car insurance deductibles a little better.