Vanishing Deductible: How Driving Safely Can Lower Your Out-of-Pocket Costs

Car insurance is a necessary expense, but that doesn't mean you can't find ways to make it more affordable for you. A vanishing deductible is an optional feature that some auto insurance companies offer that rewards you for being a safe driver and staying claim free. Every year that you drive safely and avoid getting in an accident, the amount you'll have to pay out of pocket after an accident decreases.

I have a relatively new vehicle that I'm still making payments on, so a vanishing deductible for my collision and comprehensive coverage would be beneficial. However, it may not be the best choice for everyone since it usually requires paying higher ongoing premiums.

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What is a vanishing deductible?

A vanishing deductible, also called a disappearing or diminishing deductible, is a feature in some auto insurance policies that rewards you for maintaining a clean driving record.

To fully understand vanishing deductibles, you first need to know about traditional deductibles. A deductible is the amount of money you have to pay out of pocket for repairs to your vehicle before your insurer pays out. It most often applies to collision and comprehensive insurance coverage and comes in a fixed amount, like $500 or $1,000, per claim.

With a vanishing deductible, each year or policy period that you maintain a clean driving record without accident claims or traffic violations, your deductible decreases by a set amount (typically $50 to $100). This benefit is usually optional, and not all car insurance companies offer vanishing deductibles. Opting in will likely increase your insurance premiums, but you can save money in the long term if you ever have an accident.

How does it work?

Here's an example of how a vanishing deductible works. Say you have collision coverage with a $500 deductible. Every year that you don't file a claim, your insurer decreases your deductible by $100. If you go five years without having an accident or filing a claim, your deductible could shrink to $0. If you have to file a claim after three years of safe driving, you only have to pay the reduced deductible amount, which could be about $200.

The cost of adding the vanishing deductible to your car insurance policy varies by insurer. For example, Progressive, which offers its Deductible Savings Bank, gave an example of $12 per six-month policy, though your actual cost may differ. If you go three years without a claim, your deductible would have decreased to $200, and you would have saved $228. But if the insurer charges a higher $60 per year for its vanishing deductible option, then you'd save $120.

Which car insurance companies offer vanishing deductibles?

Not all car insurance companies offer vanishing deductibles. Those that do may offer it for both comprehensive and collision coverage or only for collision coverage. Plus, availability can depend on the state.

Most insurers who give you the option don't have requirements to meet to be eligible. An exception is The Hartford, which requires you to be accident free for five years and have coverage through the insurer for three years before you can get a vanishing deductible.

Some insurance companies, including Nationwide and Allstate, give you an initial credit for adding this feature. The total cap on how much your deductible will diminish is sometimes $500.

Insurer	Yearly price deduction	Deductible type	Limits
AAA	$50	Comprehensive and collision	$500
The Hartford	$50 (after 5 years accident free and 3 years as a policyholder)	Collision	None
Nationwide	$100	Comprehensive and collision	$500
Allstate	$100	Collision	$500
Liberty Mutual	$100	Collision	None
Progressive	$100	Comprehensive and collision	None

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Should you get a policy with a vanishing deductible?

Vanishing deductibles can be very beneficial if you're a safe driver. The insurer rewards your good driving habits with savings, so if you get in an accident, the amount you have to pay out of your pocket will be less. This can give you peace of mind, especially if you're worried about your finances.

However, if you don't have collision or comprehensive coverage, then the option of getting a vanishing deductible isn't available to you.

When a vanishing deductible might not be worth it

A vanishing deductible might not be worth it if the added cost outweighs your potential savings. Insurance companies often charge higher premiums for this option. For example, if you're paying an extra $70 for your annual insurance premiums to get $100 off your deductible amount each year, you're actually only saving $30.

A vanishing deductible is also less valuable if you don't plan on keeping your policy for several years. The deductible reduction builds up over time, so switching insurers or canceling early means you'll lose the benefit before you can use it. To benefit from the option, you'll have to file a claim eventually.

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Alternatives to a vanishing deductible

If you're unsure whether a vanishing deductible is for you, consider other options that help you save money on car insurance or more easily cover a regular deductible, including:

Saving up an emergency fund: An emergency fund is wise to have for when unexpected expenses come up, like an accident. If you have an accident, you can use this money to pay your deductible. The usual recommendation is to have three to six months of your usual expenses saved.
Getting a policy with accident forgiveness: Accident forgiveness is another type of optional coverage you can get on your car insurance. It doesn't impact your deductible amount, but it protects you from having your insurance rates increase after an accident.
Choosing a smaller deductible: Most car insurance policies enable you to choose a car insurance deductible amount, and common choices are $250 to $2,000. While selecting a smaller deductible will save you money on your out-of-pocket costs if you get in an accident, it will increase your premiums.
Not carrying collision or comprehensive insurance: Having comprehensive or collision coverage can help pay for repairs or the replacement of your vehicle after an accident, but it isn't usually required unless you have a financed or leased car. If your car is older and less valuable, it may not be worth carrying the optional coverage.

FAQs

What is the AAA disappearing deductible?

AAA's disappearing deductible is its vanishing deductible coverage that is included with its Ultimate insurance policies. With it, your deductible decreases by $50 each policy term ($100 per year) when you don't have any claims during the term. The maximum benefit for the AAA disappearing deductible is $500.

Is a vanishing deductible worth it?

If you're a safe driver who rarely gets traffic violations or has accidents, then a vanishing deductible may be worth it for you. Before deciding, calculate how much the option will cost you compared to how much you'll save if you have an accident. For example, paying $12 a year for a $100 per year vanishing deductible will be more worth it than if you're paying $60 annually.

Do you get your deductible back if your car is totaled?

If your car is totaled in an accident, you'll still be responsible for paying any remaining deductible amount that you have on your policy. For example, if you've had a $100 per year vanishing deductible for three years, and your original deductible is $500, then you must still pay $200 out of your pocket before your insurance covers the rest.

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Bottom line

If you're a consistently safe driver, a vanishing deductible can be a smart way to lower your potential out-of-pocket costs in an accident. The optional coverage rewards your good driving over time, but it will increase your car insurance premiums. To determine whether it's worth having, weigh the added premium costs against the potential savings and consider how long you plan to keep your policy.

Ultimately, deciding whether to opt for a vanishing deductible depends on your driving habits, budget, and how much peace of mind you're looking for in your coverage. If your current insurer doesn't offer this feature, consider checking out some of the best car insurance companies, many of which offer various discounts for safe driving.

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