What is a vanishing deductible?
While car insurance is a necessary expense, there are ways to reduce your financial contribution for claims. Since policyholders are almost always seeking the best rate, car insurance companies commonly find ways to offer competitive benefits and discounts. One such benefit is a vanishing deductible, which allows drivers to get a lower deductible as long as they continue to remain accident-free and violation-free every policy period. If you are currently shopping around for a new policy, consider a company that offers a vanishing deductible.
What is a vanishing deductible?
So what is a vanishing deductible? A vanishing deductible is a perk for auto insurance policyholders that can decrease their deductible amount. A deductible is the amount you are required to pay out-of-pocket in the event of an accident when you use your insurance coverage. Coming up with money for an accident out of pocket can be difficult on a tight budget. The benefit to a vanishing deductible is that over time, you may not be responsible for as much of the expenses. With some insurance companies, your deductible may even disappear entirely.
Although the specifics vary by company, a vanishing deductible may also be referred to as a disappearing deductible or a diminishing deductible. Qualifications also vary by company, but generally, an insurer will lower your deductible each year you remain accident-free and violation-free, as long as you are enrolled in the vanishing deductible program. Although not all insurance carriers offer vanishing deductible programs and availability may vary by state, it could provide a good option for drivers seeking additional ways to save.
How do vanishing deductibles influence your policy?
Typically, adding a vanishing deductible to your insurance policy will increase your premium rate. While some companies offer vanishing deductibles that apply to both collision and comprehensive coverage, most companies only apply the vanishing deductible to collision coverage. Since selecting a higher deductible could save money on your premium, a diminishing deductible is a way to keep your rate lower and be rewarded for safe driving.
Suppose you select the vanishing deductible option and after three years of being accident-free, your deductible decreases from $500 to just $200. If you were to get in an accident and file a claim, you would only be responsible for paying the $200 out of pocket for repairs. However, the deductible may then reset to the higher, original amount. If you tend to get moving violations frequently or file a claim every few years, you may be resetting your savings too often to benefit from the added cost.
Most companies only allow up to a $500 deduction, meaning policies with a higher deductible may never be waived entirely even after several years of safe driving. However, if you are a safe driver and the additional cost for a vanishing deductible is negligible, it may be a worthwhile addition for you.
Vanishing deductibles from top insurance companies
Although not every car insurance company offers a vanishing deductible incentive to its policyholders, several of the top insurance companies do have some version of a deductible-reducing benefit. Allstate, Nationwide and Progressive are three of the top insurance companies offering vanishing deductible options that could help you save money in the long run.
Allstate vanishing deductible
The Allstate vanishing deductible is available through a program called Deductible Rewards, which helps drivers lessen their deductible each year for safe driving. Simply enrolling in the program could automatically lower your collision deductible by $100. Each year you say accident-free, your deductible could reduce by $100 up to a maximum of $500. If you signed up for a policy with a $1,000 collision deductible and enrolled in Deductible Rewards, your deductible could automatically drop to $900 for enrollment and drop to $600 after three years of maintaining a clean driving record.
Unfortunately, this program is not available in every state.
Nationwide vanishing deductible
The Nationwide vanishing deductible benefit is an optional feature that allows drivers to earn $100 off their deductible each year for safe driving, up to a maximum of $500. Unlike other companies, drivers with Nationwide may select to add a vanishing deductible to either their collision coverage, comprehensive coverage or both. If you do have an accident and pay your lower deductible, your deductible will not go back to its original amount. Instead, it will reset to the initial savings of $100 off.
If you are interested in signing up for a vanishing deductible through Nationwide, availability varies by state and there may be a 30-day waiting period for the benefit to take effect.
Progressive vanishing deductible
The Progressive vanishing deductible, named the Deductible Savings Bank, is for drivers who have not been involved in an accident or received any moving violations within the policy period. The program deducts $50 from either your collision or comprehensive deductible each semi-annual renewal period (or $100 annually) and decreases until you reach $0. However, the deductible does reset to the original amount once you file a claim or receive a moving violation.
Although the program is not available in every state, Progressive’s vanishing deductible is also an option for RV, motorcycle and boat policies.
Should you add a vanishing deductible to your policy?
One main factor to consider before adding a vanishing deductible program to your policy is the cost of the benefit. To determine if adding a vanishing deductible to your policy is worth the money, consider asking for a quote both with and without the benefit and calculate how much you would spend overtime. A few pros and cons of the vanishing deductible incentive include:
|Pros of a vanishing deductible||Cons of a vanishing deductible|
|In the event of an accident, you could have less of an out-of-pocket expense following a claim.||Adding vanishing deductible incentives will increase the cost of your insurance premium.|
|Drivers who typically remain accident-free and violation-free may easily be able to reap the benefits of a disappearing deductible program, allowing them to save more in the long run in case of a claim.||Depending on the company, once a driver is no longer accident-free or violation-free, the deductible often resets to a higher amount.|
|Some companies may apply a lower deductible simply for enrolling in the program.||In some cases, drivers have to wait six months to a full year before seeing a deductible decrease.|
Although a vanishing deductible could be a great perk, it is only available if you remain both accident and violation-free — a status that usually makes you eligible for many other impactful discounts. For example, many companies offer discounts for safe driving and being accident-free. When getting a quote for a vanishing deductible policy, be sure to compare the cost against simply opting for a lower deductible, which could have a similar effect of lowering your out-of-pocket expense in a claim.
Since one of the biggest cons of a vanishing deductible is the risk of your deductible resetting after an accident or claim, another policy incentive that may interest you is “accident forgiveness.” Accident forgiveness is a policy endorsement that prevents your car insurance rates from going up after your first accident. Because filing a claim increases car insurance premiums an average of 38%, you may decide that accident forgiveness provides a more cost-effective option. Ultimately, you should talk to your insurance provider to see which benefits are available to you and determine what is best for your unique situation.