Glossary
Vanishing deductible, defined
An optional auto feature that reduces the amount the policyholder pays on a collision or comprehensive claim by a set sum for each year without an accident, down to zero after enough clean years. A claim resets the credit to nothing and the countdown starts again.
In practice
It is sold as a reward for safe driving and costs an extra premium, which is the arithmetic to check: the annual charge multiplied by the years it takes to earn the full credit, against the deductible it eventually removes, assuming no claim in that time. The credit usually applies only to the vehicle physical damage coverages, not liability, and to the whole policy rather than each car under some carriers. Not every state permits it and carriers name it differently. A driver who rarely claims may do better by simply raising the deductible and pocketing the premium saved. A driver with a history of small claims will keep resetting it and get little from it.
A worked example
Suppose the feature costs $40 a year, earns $100 of credit per clean year, and the collision deductible is $500. After five claim-free years the deductible is effectively zero and the driver has paid $200 for the feature. Suppose a claim in year six; the credit resets, the $500 applies to the next loss, and the annual charge continues. Hypothetical figures.
Applies to: Auto Insurance