When you get into an accident, major or minor, you rest easy knowing that at least you have insurance to cover you. You can make a claim and the insurance company will deal with it. Hopefully you got enough car insurance where you don’t need to pay out of pocket for damages.
But you can’t forget about that pesky deductible. It’s the amount you agree to pay when making a claim. You will have to pay that out of pocket.
There is a possibility you can make your deductible disappear by adding the vanishing deductible feature onto your policy.
A handful of providers offer this perk and it could save you money by making your deductible as low as $0. But, wait. Is there a catch to this?
Let’s dig in to find out if the vanishing deductible is a feature that’s worth it for you.
What is a vanishing deductible?
Sometimes called a disappearing deductible, this is an optional add on to your auto policy. It makes your collision insurance (and sometimes comprehensive) deductible eventually “vanish” or “disappear” over time with good driving.
While insurance policies vary on how a vanishing deductible works, the basis is the same: Your deductible will “vanish” or decrease the longer you drive without an accident. It means you’ll pay less if you do get into an accident. It’s a way to encourage and reward safe driving.
How does a vanishing deductible work?
You’ll have a reduced deductible every year you don’t have an accident or major claim aka a “clean driving record.”
Insurance companies often have different definitions of a clean driving record. One might penalize you for a speeding ticket while another won’t. Check with yours to see how they define it.
Staying accident-free will earn you a $50 to $100 discount off your annual collision deductible. Most insurance companies cap the vanishing deductible savings at $500.
Say you have a $1,000 deductible. After five years of safe driving, it’ll reduce to $500. driving.
Let’s take a look at this example:
Your collision deductible: $1,000
Annual vanishing deductible discount for safe driving: $100
Your deductible after the first year of safe driving: $900
Your deductible after five years of safe driving: $500
If your deductible is $500, then there’s a possibility it’ll go down to $0 after five years of safe driving.
How can I get a vanishing deductible? Can anyone get it?
Only a few auto insurance companies offer a vanishing deductible. Some have eligibility requirements like customer history length, an accident-free driving record or the state you live in.
If you or a family member already have a vanishing deductible, it costs as little as $10 to add another vehicle or driver to the program.
Reach out to your insurance company to see if it offers a disappearing deductible, if your state has any restrictions, and how much it would be to add another vehicle.
What are the pros and cons of a vanishing deductible?
A lower deductible sounds great, right? Who wouldn’t want to immediately add that to their policy? But there’s a lot of fine print and red tape that may or may not add up to savings for you in the long run.
Here are some pros and cons:
- Some insurance companies offer $100 off your deductible within 30 days of signing up.
- You can choose a higher deductible and save on your overall premium.
- Some carriers allow you to save more than $500 on your deductible.
- You will owe less out-of-pocket if you get into an accident.
- If you get into an accident, often regardless of fault, your deductible will reset.
- It’s only offered by select insurance companies.
- You may have to elect higher premiums to get the vanishing option.
- State laws can affect your eligibility or how discounts get applied.
- There’s an annual fee required to get the benefit.You may pay more than the discount in the long run.
Does my insurance company offer vanishing deductibles?
A handful of auto insurance companies offer a disappearing deductible. The most well known are Allstate, The Hartford, Liberty Mutual, Nationwide, and Allied. Each have different requirements and terms.
Many other carriers offer accident forgiveness instead of a vanishing deductible. If you add accident forgiveness to your policy, your insurer won’t raise your premium if you get into an accident. Some insurers offer it in tandem with a disappearing deductible.
But is it worth it for me or not?
Don’t worry, we’ll help you figure it out. Here are some things to consider:
How’s your budget?
A couple insurers require that you pay an annual fee or “buy” the benefit (it also will contribute to the fund) which could make your premium higher than before.
How’s your driving?
Since the discount depends on no major claims and a safe driving record year-to-year, this should help you determine whether or not you should opt for a vanishing deductible.
If you have an excellent driving record and want to save money, it could benefit you.
Chances of an accident?
Lower deductibles only save you money IF you get into an accident or make a claim.
If you don’t drive regularly or have a relatively safe commute with little to no traffic, then your risk of getting into an accident is very low. A vanishing deductible might not be worth it in those cases.
Crunch the numbers
If you have more than five accident-free years and your vanishing deductible maxes out at $500, you may end up paying more than the discount is worth.
If you have a higher premium or fee to get the benefit, then it’s definitely not worth it.
What is your vehicle worth
The value of the discount might not outweigh the cost of repairing your vehicle if you get into an accident.
Peace of mind
For some drivers, knowing that you’ll pay less out-of-pocket if you get into an accident carries a higher value in peace of mind.
Are there other options out there for me?
Here are a few alternatives to consider if a vanishing deductible is not an option for you.
- Accident forgiveness: This popular perk also helps drivers if they get into a collision. It rewards longtime good drivers with a promise not to raise premiums if they get into an accident. Insurers offer it to reward longtime policyholders, but sometimes you can buy it as an add-on.
- Tweak your policy: What’s the difference in your annual policy premium if you lower or raise your deductible? It might be comparable — if not cheaper — in the long run to pay a higher premium for a lower deductible.
- Create your own deductible fund: Don’t rely on your insurance company to save the money for you — do it yourself. Put away $100 in a savings account every year and use it for your deductible if you get into an accident. It works as an accident emergency fund.
- Shop around for insurance: A vanishing deductible only saves you money IF you get into an accident. You can find that annual $100 savings faster by shopping around and finding your same insurance coverage for a cheaper price.