What is a ‘Disappearing Deductible’?

Some car insurance policies come with a ‘disappearing deductible’. Some insurers advertise disappearing deductible policies as a great way to save money. Today, we’re explaining everything you need to know about a disappearing deductible policy – including whether or not it’s worth it to add a disappearing deductible to your plan.

disappearing deductibles

What is a Disappearing Deductible?

You may have seen ads on TV advertising a disappearing deductible. These ads attempt to woo drivers with a safe driving record. Car insurance companies make a disappearing deductible seem like a great way to save money on car insurance.

Essentially, a disappearing deductible is a formula that decreases your deductible by a certain amount over a period of years, eventually disappearing entirely to provide full coverage after losses reach a specific limit.

In plain English, this means that the longer you go without a claim, the lower your insurance deductible can be. If you go 10 years without making a claim on your insurance, then you might pay a $0 deductible as your ‘reward’ for years of not making a claim. If you drive accident-free for 10 years, then you might not pay a deductible on your next car insurance claim.

Disappearing deductible car insurance policies are not offered by all insurers in all states. Disappearing deductible policies always come with an added cost – like higher insurance premiums. To qualify, you typically need to go accident-free, claims-free, and moving violation-free for the duration of your policy. If you make a claim or get a speeding ticket, then your disappearing deductible ‘reappears’.

Which Car Insurance Companies Offer Disappearing Deductibles?

Disappearing deductibles were once common practice in property insurance policies. Today, they’re offered by a handful of major car insurance companies, including Nationwide, Allstate, Liberty Mutual, and The Hartford.

These disappearing deductible car insurance policies can vary widely between agencies.

Nationwide, for example, calls their program the ‘Vanishing Deductible Program’. Under this program, your deductible drops by $100 for every year of accident-free driving you accrue, up to a limit of five years and $500. If your deductible is $500, then this policy can make your deductible disappear entirely.

The Hartford, meanwhile, has a Disappearing Deductible program that will drop your deductible by about $50 per year, assuming you drive accident-free and have no moving violations on your record within the last three years. Unlike with Nationwide, there’s no limit to the number of years you can accrue: theoretically, you can pay zero deductible if you continue driving incident-free.

Allstate has its Deductible Rewards program that works in a slightly different way from the two options mentioned above. Allstate’s program gives you $100 off your deductible immediately after signing up for the disappearing deductible program. Then, for every year you are accident-free, another $100 will be deducted from your deductible, up to a limit of $500.

Liberty Mutual calls its disappearing deductible program a ‘Deductible Fund’. Under this program, your deductible does not technically disappear. However, you can still save money towards your deductible, and Liberty Mutual will pay a portion of your deductible if you need to make a claim. You pay $30 towards your deductible the first year, and Liberty Mutual pays another $70, giving you a total of $100 off your deductible. The deductible fund never expires for as long as you are a Liberty Mutual customer.

How to Get a Disappearing Deductible Car Insurance Policy

Disappearing deductible policies always come with an added cost. You pay slightly higher insurance premiums in exchange for the chance of reducing your deductible.

Nationwide customers, for example, will pay an extra $60 for the Vanishing Deductible Program. Depending on your insurance company, you might pay less or more than that amount.

Disappearing deductible policies aren’t available to all customers in all states. Some insurance companies require you to be in good standing to qualify. To qualify for Allstate’s disappearing deductible policy, for example, you will need to buy a gold or platinum policy.

Other insurance companies only offer disappearing deductible policies in certain states.

What’s the Catch with Disappearing Deductibles?

Insurance companies don’t offer disappearing deductible programs to be generous: insurance companies are for-profit corporations dedicated to making money. They offer disappearing deductible programs because they make more money by offering these programs.

Consider the cost: you pay $50 extra per year for a disappearing deductible policy. You save $100 per year on your deductible, assuming you drive accident-free with no moving violations (like a single speeding ticket).

In a perfect world, you will drive accident-free for five years before making a claim, at which point the disappearing deductible policy will instantly pay for itself. Yes, certain drivers will save money with a disappearing deductible program. Most drivers, however, will pay more.

Conclusion

Disappearing deductible programs are offered by certain car insurance companies. You pay higher insurance premiums today in exchange for a lower car insurance deductible in the future. Some companies allow you to reduce your deductible all the way to $0. Other car insurance companies allow you to lower your deductible to $500 or less.

Compare car insurance quotes today to determine if disappearing deductible car insurance is the right choice for you. In most cases, you pay more for disappearing deductible car insurance in the long run. However, depending on your lifestyle, budget, and driving record, it may be the right choice for you.

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