Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Content Writer & Entrepreneur Shuman Roy

Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Jun 28, 2022

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Here we go again.

We’ve already written about Nationwide’s Vanishing Deductible. Now it’s time to talk about Liberty Mutual’s “Deductible Fund.”

If it sounds like you’ve heard this one before, you’re probably onto something.

Yes, car insurance companies are constantly looking for way to “spice things up,” seeing that insurance is probably one of the most boring products out there.

And Liberty Mutual has really been going all out to give basic insurance products fancy names.

After all, they’re the same company behind Better Car Replacement, Home Protector Plus, and 12-Month Rate Guarantee.

So it comes as little surprise that they launch a new cleverly named product aimed at snatching your insurance dollars.

How does Liberty Mutual’s deductible fund work?

First things first, what the heck is it?

We know it has something to do with deductibles, which are paid in the event you damage your car, file an insurance claim, and need repairs. You pay $30 in advance as part of your annual premium towards the deductible fund, and then Liberty Mutual lowers your deductible by $100 every year. The money in your fund will lower the balance your pay out of pocket in case of filling a claim.

So this fund is basically like a piggy bank for in the event you need to pay a deductible out-of-pocket.

Instead of having to fork over $500 (or $1,000) when you get into a wreck, you’ll have the money set aside for that eventual rainy day.

When you sign up you “earn” $100 toward your deductible automatically. In each subsequent year you earn another $100 to eventually lower a $500 deductible to zero.

It should be noted that the collision deductible will not drop below $100 for drivers residing in the state of New York.

The obvious benefit to this product is that you won’t have to worry about paying a deductible should you get into an at-fault accident.

But what if you don’t get into an accident that’s your fault over those five years or even longer?

If you are an existing customer, you can call Liberty Mutual to get enrolled, but if you’re new, get an auto insurance quote first. Once you submit a claim, you’ll need to pay your insurance deductible. If you need to use your entire fund, the deductible fund will reset automatically at renewal. The fund will continue increasing each year and you can use the money whenever you need it.

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Is the deductible fund optional coverage?

Did we mention that Liberty Mutual’s Deductible Fund is optional coverage?

Another way of saying optional in the insurance world is “it ain’t free.” That’s right, it’s a policy add-on that you pay for upfront to potentially save you money in the future.

And that’s the rub…you’re basically buying extra insurance on top of your existing insurance in the event of a collision that’s your fault.

This applies to collision coverage, not comprehensive coverage. So in certain cases you may not actually save any money if you damage your vehicle, even with this add-on coverage in place.

The upside is if you do get into an accident where your deductible is triggered, it may cost your zero dollars.

And this could save you a lot of money if you get into several accidents in one year and need to pay multiple deductibles.

However, you’d need to consider how much the coverage set you back each year before the accident occurred.

If you pay towards the deductible fund every year, you could gradually increase your deductible which in turn will reduce the amount of insurance premium. The deductible fund is similar to a savings account except that the insurance company keeps and controls the money instead of you.

Additionally, you’ll also need to compare the cost of an auto insurance policy with Liberty Mutual to other carriers.

You might find a policy with a different auto insurance company that is more than $100 cheaper annually, which could clearly turn out to be the better deal, especially if you don’t get into an accident.

At the end of the day, insurance is intended to limit your losses in the event of an accident. So buying excessive/optional coverage might be a losing proposition as you’re essentially betting against yourself (twice) as a driver.

All you’re really doing is ensuring your insurance company gets more of your money.

It reminds us of accident forgiveness, which we see as insurance for your insurance. At some point you need to say enough is enough.

Liberty Mutual’s deductible fund FAQ

  • Optional coverage, not free (check the cost to determine if it’s worth it)
  • Lowers your collision deductible $100 initially and $100 each year after
  • No limit to the “Deductible Fund dollars” you can earn
  • Covers every vehicle on your policy that has collision coverage
  • Keep same reduced deductible for full policy year even after an accident
  • You don’t need to be accident-free to purchase this coverage
  • Might be cheaper to use a different insurance carrier and pay your own higher deductible

Read more: A higher deductible means a lower premium.

(photo: Ryan Hyde)