What Is a Vanishing Deductible and How Does It Work?

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Insurance agent explaining what a vanishing deductible is to a client

According to Farmers Insurance, the most common auto insurance deductible is $500. Unfortunately, for many drivers, $500 is too much. Wouldn’t it be great to watch your deductibles drop simply by maintaining a clean driving record? Luckily, vanishing deductibles offered by participating auto insurance companies make it possible.

In this guide, we’ll answer questions on what vanishing deductibles are, how they work, which insurers offer vanishing deductibles, and how much you can expect to save.

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What Is a Vanishing Deductible?

A vanishing deductible is an incentive offered by participating insurers that lowers your deductible by a set amount every year in exchange for maintaining a clean driving record.

Other names for vanishing deductibles include disappearing deductibles or diminishing deductibles.

One of the most popular vanishing deductible programs is from Nationwide, which awards $100 off your deductible for every year of good driving up to a max of $500.

How Does a Vanishing Deductible Work?

Vanishing deductibles are easy to understand. Let’s use Nationwide‘s Vanishing Deductible program as an example.

Pretend you have a $1,000 deductible amount on a brand new Audi A4 lease and are enrolled in the Vanishing Deductible program. You get $100 off your deductible every year you have zero claims and zero moving violations.

After two years, you’ll earn a $200 credit, which means any accident would require an $800 deductible ($1000 minus the $200 credit) before insurance pays out the rest.

Any accident either reverts your available credit to $0 or the participating auto insurer‘s chosen amount. For example, Nationwide would reset your deductible reward to $100.

Are Vanishing Deductibles the Same as Accident Forgiveness?

2 cars that crashed into each other

Vanishing deductibles and accident forgiveness programs are two different things. Accident forgiveness programs promise that insurers won’t raise premiums if you’re involved in an accident. Consider it a perk for long-time good drivers.

Some insurers package vanishing deductibles and accident forgiveness to offer more competitive terms. Grouping these benefits reduces out-of-pocket costs once an insurance claim is acceptable and mitigates insurance rate increases for first-time at-fault accidents.

How Much Does It Cost to Opt Into Vanishing Deductibles?

Every insurer sets its costs for enrolling in a vanishing deductible program. Many, like Mapfre, offer it at no additional cost as long as you have collision coverage. On top of flat fees, every insurer also has its eligibility requirements (e.g., accident-free driving record for three years).

Do Vanishing Deductibles Apply to Comprehensive and Collision Deductibles?

Most vanishing deductible programs extend their benefit to collision deductibles. A higher percentage of collision claims caused by at-fault accidents are more likely to impact your premiums over comprehensive-type claims, usually because of things outside your control. Any rate increases make up for costs by collision claims, thus vanishing deductibles apply to collision deductibles only.

Of all insurers, only Nationwide extends vanishing deductibles to collision and comprehensive insurance coverage.

Which Insurers Offer Vanishing Deductibles?

Some highly rated insurers that offer vanishing deductibles include Allied, Liberty Mutual, The Hartford, Allstate, and Nationwide.

Every insurer has different max vanishing deductibles and eligibility requirements. For example, Mapfre offers $50 in vanishing deductible credits for each year of safe driving up to four years, with a $100 deductible credit on the fifth year for a maximum of $300 earned credits.

In turn, Nationwide knocks $100 off your collision or comprehensive deductible up to a maximum of $500 for every year of safe driving.

Lastly, Liberty Mutual’s Deductible Fund program requires policyholders to contribute $30 towards their vanishing deductible every year. In turn, Liberty Mutual contributes $70 for a total deductible savings of $100. The process repeats each year. However, unlike Nationwide, Liberty Mutual policyholders continue to earn and save beyond a $500 max.

Other eligibility requirements focus on having collision or limited collision coverage and additional coverages at the time of purchase.

Prefer an incentive for joining? Allstate offers policyholders a $100 bonus simply for enrolling in its disappearing deductible program (with $100 off your deductible for every year of safe driving up to $500) with no accident-free record required.

Are Vanishing Deductible Programs Worth It?

Vanishing deductible: stressed man near a damaged car

We recommend vanishing deductible programs if you can stomach the annual or buy-in fee and have an excellent driving record. A single claim could reset your policy at $0, forcing five years to max it out at $500, so good drivers with a violation-free driving record are more likely to benefit.

Opting for the vanishing deductible program is a gamble. You’re betting that you won’t get into an accident for a few years but that it’ll eventually happen. For example, if you make it to year 5 of safe driving, you’ve spent a minimum of $300; but if you get into an accident that year, you’ll come out $200 ahead.

The vanishing deductible grants some peace of mind because you know you won’t have to come up with a hefty deductible out of the blue if you get into an accident. However, there are better ways to save money in the long run. For example, if you know you’re a safe driver, you may be better off opting for a high car insurance deductible instead of one that shrinks over time, saving you money on your premiums.

Some insurers like Nationwide offer a safe driver discount of up to 10% if you have no at-fault accidents or significant violations for at least five years. There, any benefit provided by vanishing deductibles is negated.

One way to think about the value of a vanishing deductible is this: Is it more beneficial for the customer or the insurance company? Drivers who opt for a vanishing deductible may end up paying for a discount that goes unused or even paying for minor repairs themselves, so they keep the deductible discount. Both scenarios benefit the insurer, not the customer.

Shop Around for the Best Car Insurance Rates

Are you looking for a new, affordable auto insurance policy with or without a vanishing deductible? Compare.com offers real-time quotes from dozens of top-rated car insurance companies, including AAA, Metromile, Nationwide, 21st Century, The Hartford, and Liberty Mutual. Finding the right coverage for you and your family only takes a few minutes!

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