Personal Liability Insurance: What Happens When Someone Gets Hurt on Your Property

If you’ve recently reviewed your Massachusetts auto insurance declaration page, you may have noticed a section for  “deductible dollars”  or  “claims-free deductible credits.”  But what exactly are these, and how do they impact your policy? More importantly, did you know they can  help you save money and reduce the risk of your policy being non-renewed?

Let’s break it down.

In an auto insurance policy, a  deductible  is the amount you have to pay out of pocket before your insurance company covers the remaining costs of a claim. Most Massachusetts auto policies have a  standard $500 deductible  for collision claims.

However, some insurance companies offer  claims-free deductible credits  over time. This means that for every year you drive  without filing a claim, you earn credits  that can  reduce the amount you owe if you do have an accident.

This is sometimes called a  “disappearing deductible”  because, if you accumulate enough credits, your deductible amount can be significantly reduced—or even eliminated—after an accident.

Here’s an example of how it works:

✅ Let’s say you’ve earned  $500 in deductible credits  over the past several years by staying claim-free.

✅ If you get into an at-fault accident and your collision deductible is $1,000, you  don’t have to pay the full $1,000 . Instead, your deductible credits would cover $500, meaning your  out-of-pocket cost is only $500.

✅ However, once used, these credits  reset to zero , and you’ll need to rebuild them by maintaining a  claims-free record in the future.

One of the  biggest advantages  of deductible credits is that they allow you to  adjust your policy strategically to lower your insurance premiums .

Here’s how:

🔹  Option 1: Stick with a standard $500 deductible

• Annual premium: $1,000
• Deductible credits: $500
• Out-of-pocket deductible: $500

🔹  Option 2: Increase your deductible to $1,000  (if you have $500 in credits)

• Annual premium: $800 (a savings of ~$200 per year per car!)
• Deductible credits: $500
• Out-of-pocket deductible (if a claim is made):  Still only $500

Bottom line:  If you have deductible credits built up, you can safely increase your deductible  to lower your monthly premiums —while still maintaining a reasonable out-of-pocket expense in case of a claim.

Beyond saving money on premiums, there’s another major advantage to raising your deductible:  it can help you keep your policy from being non-renewed.

Here’s why:

• Insurance companies evaluate your claim history.  Every insurer assesses the  frequency of claims filed  and the  total amount paid out  over time.
• Frequent claims or high payouts can flag you as a high-risk policyholder.  If you file multiple claims—even for small amounts—it increases the likelihood that your insurer will  either raise your rates significantly or decline to renew your policy altogether.
• A higher deductible discourages small claims.  If you raise your deductible to $1,000 or more, you’re less likely to file small claims (like minor fender benders or cosmetic damage). This keeps your  claim frequency low , which  looks better to insurance companies  and helps ensure your policy remains active.

🚨  Important Tip:  Even if you have deductible credits, remember that once they’re used, you’ll have to  rebuild them over time . Carefully consider whether a claim is truly necessary, especially for minor damage that might cost less than your deductible.

Once you use your  deductible credits , they do  not  reset immediately. Instead, you’ll have to  rebuild them over time  by remaining claim-free for a certain number of years.

This means:
✔️  Before increasing your deductible, make sure you have enough deductible credits available  to reduce your out-of-pocket cost in case of an accident.
✔️ If you  file a claim , you’ll need to start earning credits again from scratch.
✔️ Keeping your claims history low can  help you maintain lower premiums and avoid policy non-renewal .

If you’ve been  accident-free for several years  and have accumulated deductible credits, you may want to consider  raising your deductible to $1,000 (or higher)  to reduce your insurance premiums  and minimize the chances of policy non-renewal.

However, before making any changes:
🔹 Check your  deductible credit balance  on your declaration page.
🔹  Compare premium savings  between different deductible amounts.
🔹  Assess your financial situation —make sure you can afford the out-of-pocket cost if a claim happens.
🔹  Consult your insurance provider  to ensure this strategy makes sense for your policy.

Understanding deductible dollars can help you  make smarter decisions about your auto insurance policy . If you’ve built up deductible credits, you might be  missing out on easy savings  by not adjusting your policy accordingly.

Even more importantly, choosing a  higher deductible can reduce the likelihood of policy non-renewal , since it keeps your  claims frequency and payout history lower —two key factors insurance companies look at when deciding whether to renew policies.

🚗  Want more ways to lower your car insurance premiums and avoid policy non-renewal? Check out our related articles on maximizing your coverage while saving money!

💬 Have any questions about your deductible dollars? Reach out to our team at Vargas & Vargas Insurance at 617-298-0655 or drop a comment below or talk to your insurance provider today!