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Vanishing Deductibles: What Is It and Who Offer It?

Let’s not put the cart before the horse here. Before explaining what a vanishing deductible is, let’s start with what a deductible is. A deductible is the amount you must pay for covered insurance services before your insurance begins to pay. Typically the lower your deductible payment the higher your monthly payment, and vice versa. So taking it a step further, a vanishing deductible is a way for the amount of your deductible to be reduced each year.

Many insurance companies offer different vanishing-deductible policy add-ons. Those add-ons are usually based on the insured being good drivers, with the vanishing deductible as the “reward” for good driving.

Who Offer Vanishing Deductibles?

Nationwide offers an add-on that reduces your deductible by $100 for each year of safe driving. This is an optional feature. The vanishing deductible maxes out at a $500 total reduction. If you get into an accident, the deductible does not reset.

Allstate offers Allstate Deductible Rewards. These rewards are similar to what Nationwide offers. For each year of safe driving, your deductible is reduced by $100, up to $500.

Liberty Mutual offers the Deductible Fund. It acts almost like a bank account. You enroll in the Deductible Fund and can save as much as $100 annually. It’s a little different from the other vanishing deductibles. In this situation, you contribute $30 each year to your fund. Liberty Mutual then contributes $70 each year to your fund. In this situation, there is no maximum limit. As long as you contribute and you are a Liberty Mutual customer, the money in the fund will continue to increase.

The Hartford offers a “disappearing deductible”. To qualify for this vanishing deductible you must first have been driving accident-free for five years. Three of those years need to be as a customer of The Hartford. If you qualify your collision deductible will be reduced by $150. Each year after the five years, an additional $50 will “disappear” from your deductible. This feature is available only with the Advantage Plus package.

More about Deductible:

Should You Get Vanishing Deductibles?

Now that you know the basics of a vanishing deductible, consider if it’s the right fit for you. It may seem like a no-brainer. Who wouldn’t want to earn money based on being a good driver? But there are some factors to take into consideration.

The first one is, how often do you use your deductible? There are several situations where you may use your deductible quite frequently. In these instances you might want to consider enrolling in a vanishing-deductible program.

  • Leasing a vehicle and want to maintain condition
  • Want to maintain value of new vehicle
  • Insuring teenage drivers

The second question to ask is: Does this policy option increase the premium more than it would decrease the deductible? That question is one to ask your current car insurance provider. There may be some instances (i.e. insuring multiple vehicles) that it would be detrimental to enroll in a vanishing-deductible program.

Other Considerations Before Enrolling

If you are interested in enrolling in a vanishing-deductible program, there are some aspects to consider first. Most of these factors must be discussed with your current insurance provided.

  • What does a clean driving record entail?
  • Does every policy member need to have a “clean record”?
  • Can only one vehicle of multiple be enrolled?
  • Are there any limitations due to the state where you reside in?

Overall it’s most likely a benefit for you to be enrolled in a vanishing-deductible program. However, there are certain instances where it wouldn’t. Check with your insurance provider for clarification.

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