As you might have seen on TV several insurance companies are offering a vanishing deductible for auto insurance policies.  Its alleged purpose is to encourage safe driving. The company will reduce your deductible by $100 for every year you don’t file a claim.  What the commercials fail to mention is that there is an extra fee to get the coverage.

How the Vanishing Deductible works:

  • The credit applies to both comprehensive and collision
  • There is usually an immediate $100 credit applied
  • Depending on the company and it’s rules you will receive an additional $100 credit every year you remain accident-free.
  • Claims will automatically be settled using the deductible credit.  If used the deductible will be reset to $100.

Benefits:

  • Reduced out of pocket expenses in event of a claim.
  • Safe driving will result in additional deductible savings.
  • Ability to choose higher deductibles to save on policy premium.

The Catch

It simply costs more.  When watching the commercials you would assume that it is part of the company’s standard program.  But if you call the company to get a rate you have to specifically ask for the coverage and pay a fee to get it. It typically costs about an addition 5% to 6% to acquire the coverage.  You’re basically paying the company in advance to offset your deductible if you have an accident.  Currently, the numbers don’t add up; while it’s a very popular concept, you would be better off just saving your money and paying the deductible if an accident ever occurs.  We’ll keep an eye on it and alert you if vanishing-deductible coverage ever does become cost effective.

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