Auto Insurance Providers with a Vanishing Deductible
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When it comes to keeping your budget in check and your costs low, it can be tempting to skimp on various auto insurance costs. After all, just because collision coverage may be required in your state or city doesn’t mean you have to have a higher premium or insurance deductible. When it comes to cutting costs, insurance companies have various perks and add-ons available to drivers interested in lowering their car insurance deductible and other associated costs.
One of the easiest ways to save money is to have a higher deductible or enroll in accident forgiveness programs that keep your premium from going up in the event of an accident. Another option to consider is a vanishing deductible (also known as a disappearing deductible).
Like other safe driving programs, a vanishing deductible offers policyholders a way to lower their deductible year over year based on good driving habits and an absence of moving violations. Learn more about eligibility requirements, which insurers offer vanishing deductibles, and whether or not these kinds of deductible rewards are even in your best interest below.
In this article
What exactly is a vanishing deductible?
While the phrase “vanishing deductible” may conjure up images of a magician and their disappearing act, it’s actually a reward of sorts that you can receive for being accident-free and loyal to the same insurer. Generally, a vanishing or disappearing deductible is a credit toward your collision deductible. This means that while it won’t affect your insurance rates, it will make a difference should you wind up in an accident with repair costs.
Suppose you already have comprehensive coverage as part of your insurance policy. In that case, having a vanishing deductible could be a valuable way to lower some of your costs if you are in an accident. After all, the sooner you reach your deductible, the sooner your insurance policy kicks in to cover the overage, so decreasing the amount of your deductible over time can be advantageous if you’ve got a clean driving record.
What are the ins and outs of vanishing deductibles?
If you have a high deductible cost, the ability to apply credits to lower that cost can be a significant boon for drivers. If you’ve been uninsured before because of financial issues or are insuring an older, used vehicle instead of a new car, reducing some of your insurance costs can be incredibly helpful when balancing your finances. Here’s a handy guide to understanding what a vanishing deductible can (and can’t) do for you and your auto insurance coverage.
What a vanishing deductible is
A vanishing or disappearing deductible functions by applying various credits to your existing auto insurance policy. Most insurance companies offer vanishing deductibles to both collision deductibles and comprehensive coverage. Generally speaking, the amount of credit applied to your deductible will range from about $50 to $100.
When your deductible credit is applied will depend on your insurance provider. While milestones vary from insurer to insurer, the first time you should expect to see credit is at the end of your first year of coverage, around the same time you should be renewing your coverage. Credits stack each year, so if you were accident-free for seven years, you could potentially have a deductible credit of anywhere from $350 to $700!
What a vanishing deductible is not
While you can undoubtedly accrue a significant amount of credit thanks to a vanishing deductible add-on to your insurance policy, you don’t have any control over when you choose to use that credit. This means that if you’ve been saving your credit for a while — thanks to your good driving habits — and have a minor insurance claim that you’d rather pay for yourself instead of burning your credit, you won’t have that option.
As a result, if you want to keep your credit for a more severe usage case, you’ll need to be prepared to pay for expenses out-of-pocket. All of your credit gets spent when a claim is filed, so you don’t have much control over when it kicks in. Just have some peace of mind that it will lower the deductible you owe.
Eligibility
Before you reach out to your auto insurance agent to get an insurance quote for vanishing deductibles, it’s essential to know whether or not you can even qualify for this add-on. For starters, you’ll want to make sure that your auto insurer even offers a vanishing deductible. While popular, a vanishing deductible is a much more niche offering, so few insurance companies provide this coverage.
Once you’ve confirmed that your auto insurer offers vanishing or disappearing deductibles, you’ll want to check if this coverage is applicable in your state. It’s also worth noting that different insurance companies may have other requirements to meet before you sign up for a vanishing deductible program. Generally speaking, these requirements relate to your driving record and the length of time you’ve been a policyholder with a particular insurer.
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Auto insurance companies offering vanishing or disappearing deductibles
Not every auto insurance provider offers vanishing deductible programs. As such, if you’re truly interested in this kind of add-on perk, you may need to shop around and switch insurance providers. Here are four of the major insurance companies offering disappearing deductible programs.
Allstate
Allstate offers a disappearing deductible program as an add-on. The good news is that the same day you opt into their program, you’ll immediately receive a $100 deductible credit applied to your collision deductible. Allstate will add $100 to your deductible credit each subsequent year that you're accident-free. This amount eventually caps out at $500. Additionally, you’ll need gold or platinum auto insurance coverage to qualify for a vanishing deductible from Allstate.
If your deductible is $1,000, getting half of your out-of-pocket expenses covered via disappearing deductible credits can be a significant help. Plus, you’ll pay even less out-of-pocket if your deductible is lower. If you’re in an accident and use your vanishing deductible credit, your deductible will go back to its initial amount following the use of your credit.
Nationwide
Nationwide’s vanishing deductible program is quite similar to Allstate’s program. About 30 days after you’ve signed up for the program, you can expect to receive your first $100 deductible credit. Each subsequent year, you remain accident-free with a clean driving record and will receive an additional $100 credit for the program. This amount maxes out at $500, just like Allstate’s program.
This is an add-on perk to your existing auto insurance policy, so if you’re interested in enrolling in this program, you’ll need to contact your agent. If you are in an accident and using your credit, your vanishing deductible amount will reset to $100.
Liberty Mutual
Of all the auto insurance companies on this list, Liberty Mutual is the most up-front about the costs associated with its vanishing deductible program. While that’s a good thing in the name of transparency, it is important to note that Liberty Mutual’s “disappearing deductible” program is called a “Deductible Fund.”
What exactly is a deductible fund? The good news is that it serves the same purpose as a vanishing deductible program and is a fund that both you and your insurer contribute to reducing the cost of your deductible. For example, in the first year you’re enrolled with Liberty Mutual’s Deductible Fund, you might contribute $30, and then Liberty Mutual will contribute $70 for a total deductible credit of $100. The contributions stay the same for each following year, and you can even continue accruing credit past the typical five-year mark.
Costs
Different insurers will offer vanishing deductible programs at various price points, but generally speaking, coverage hovers between $10 and $30 a year, depending on if you already have a driver or vehicle enrolled in a disappearing deductible program.
For example, Liberty Mutual is clear-cut about their pricing, which is $30 from you and $70 from them. This helps illustrate the value and trade-off offered by vanishing deductible programs. For some people (likely those with a good driving record in the first place or who don’t drive a lot), a vanishing deductible can be worth opting into because it means you can access your insurance benefits much more quickly if you’re in an accident.
On the other hand, some people may find that having a vanishing deductible could lull them into a false sense of security. Since your deductible often resets after an accident, it’s important to have cash on hand to cover that amount if you’re in an accident and then find yourself needing to file another insurance claim quickly following the reset.
Pros and cons
Pros
- Reduces the cost of your deductible. While the $500 cap on most vanishing deductible policy add-ons means that not all of your deductible costs may be covered, getting a $500 discount can make getting in an accident much less of a financial hit to your budget. Especially if you have to have a higher deductible because of specific coverage requirements, any discount you can get on your insurance costs is worth looking into.
- Rewards good drivers. If you’re already a good driver, you can think about a vanishing deductible program as a reward for your good behavior. So many people speed or are reckless behind the wheel, and if you don’t fit into this category, you deserve to cash in on your good driving habits and clean record.
- Some policies are particularly generous. As evidenced by insurers like Liberty Mutual, you can use a vanishing deductible program to the extent that you don’t even have a deductible cost associated with your policy! A $0 deductible is undoubtedly a fantastic perk on your policy.
Cons
- Eligibility requirements aren’t friendly to new drivers. Most auto insurers want to see at least three years of accident-free driving before you can opt into a vanishing deductible program. As such, if you’ve just passed your driving test and received your license for the first time (or just purchased a car for the first time), you won’t be able to take advantage of these kinds of add-ons.
- Not offered by many insurers. Not many auto insurance companies offer this kind of coverage. If you’re interested in a vanishing deductible and don’t already have coverage with Allstate, Liberty Mutual, or Nationwide, you’ll need to make a switch if you want to save with this perk.
- Could cause you to overpay for coverage. All insurance is only valuable if you need to take advantage of it. That means drivers with immaculate driving records could wind up paying an unnecessary cost for coverage they may never use (or use rarely).
- Many policies cap out at $500. Not that a $500 discount is anything to sneeze at, but having caps to the discount that can be applied to your deductible ultimately means that you need to do some mental math to determine the value of a vanishing deductible with your policy. It might not make the cut for some drivers and could be seen as an extraneous add-on to your auto policy.
The bottom line
Adding a vanishing deductible to your auto insurance policy might seem like a no-brainer if you've never been in an accident or had any traffic violations. After all, reducing the cost of your deductible for every year you have a clean driving record can give you more value and reward you for your safe driving habits. Even so, it’s still an additional cost to add to your annual premium, which may or may not be something you want to pay for.
For example, if you consider that you might pay $30 a year for a vanishing deductible and the maximum discount it can give you is $500, you’ll have paid $150 for a $500 deduction over five years. That’s obvious math in your favor since you’re netting $350 in this equation. At the same time, however, the auto insurer is getting $150 more than they would have if you weren’t enrolled in the program. Considering that you’ve already met eligibility requirements regarding your driving habits in the first place, in those five years, you wouldn’t even need to touch your deductible. As such, you’re giving the insurance company more money for coverage you didn’t even need in the first place since each year you don’t use your credit is a year the insurance agent gets free money from you without fully “earning” it.
Of course, even in the above scenario, if 10 years into paying $30 extra a year, you do need to use your vanishing deductible, you’re still getting $200 in savings. Ultimately, determining whether or not to opt into a vanishing deductible program is as much about your appetite for long-term and short-term risk as it is about your driving habits and overall financial situation in the short and long term.
Save $1,604 (or more) per year on car insurance today.
- 2-minute quote
- State minimum coverage
- Full coverage
- Explore top brands
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Writer
Brent Ervin-Eickhoff is a Chicago-based writer, stage director, and filmmaker with a background in digital marketing and content creation. In addition to Joy Wallet, Brent has written for Complex, Volkswagen, HowlRound, Picture this Post, and Third Coast Review, among others. He currently serves as the Associate Director of Marketing for Content Creation at Court Theatre at the University of Chicago. Brent graduated from Ball State University with Academic Honors in Writing.
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