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What is a Vanishing Deductible and How Does it Work on my Auto Insurance Policy?

Saving money on auto insurance doesn't all have to happen when you pay the premiums. These days some insurance carriers are offering discounts that don't apply until later, like when you're filing a claim and are faced with a deductible to pay. These insurance companies are offering what they call a vanishing deductible that decreases each year so your portion of the financial responsibility decreases each year as well.

What is a Deductible?

Before getting into the details of a vanishing deductible, it's important to understand what a deductible is in general. It is part of your insurance policy if you have comprehensive and collision coverage, which pays for repairs to your car in an accident, theft, or natural disaster. However, all auto insurance policies include a deductible for your comprehensive and collision coverage, which is a small amount that you must pay out of pocket before the insurance company steps in and pays for the rest of the repairs. In most cases, your deductible is between $200 and $1,000, and choosing a higher deductible can get you a lower premium.

How Does the Deductible Vanish?

Some insurance carriers these days are offering a special feature on their policy where the deductible decreases over time, potentially being entirely eliminated. In most cases, the deductible will go down by a fixed amount, like $50 or $100 each year you have the policy but don't make a claim. For example, say your deductible was $500 but you have had a vanishing deductible policy for three years. In this scenario, you would get $300 off your deductible if you had to make a claim, so you would only have to pay $200 out of pocket.

What are the Limitations?

Each insurance company has its own specific details, but usually your deductible can only decrease by a set amount. For example, if the deductible can only go down by $500 and you start with a deductible of $1,000, the lowest you'll be able to get it is $500, even if you have the policy for more than five years. The other factor to consider is that the vanishing portion of the deductible resets if you make a claim, and often if you get a moving violation as well. Therefore, you could be back up to your original deductible with just one speeding ticket.

What is the Cost?

The vanishing deductible feature doesn't necessarily get included with your auto insurance policy for free. In most cases, you'll have to pay a fixed annual fee for the benefit, or perhaps have a percentage tacked onto the cost of your coverage.

Because of this, it's important to compare quotes from different companies to figure out which one has the best policy and rate for your needs. By comparing quotes on this website, you will be to identify if a vanishing deductible is better for you or a regular deductible is better for you.

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