Car insurance innovations are possibly the greatest example of a follow-the-herd mentality in the financial services industries. Whenever a leading car insurance company launches a national campaign to tout a new coverage option or feature, it’s not long before competitors are close behind like drivers drafting behind a leader in a stock car race. One of the more recent features goes by many names accident forgiveness, diminishing deductible, safe driving deductible rewards, etc. but they all essentially offer the same promise. Go for an extended period of time without a claimable accident and the insurer will reduce the deductible on select coverage options carrying one.
Nationwide has tagged its version of this option with the catchy phrase, Vanishing Deductible, and has even built several memorable television commercials around it.
Here’s a quick overview of how it works and a few things you may want to consider before adding it to your policy.
How it works
One of the first things to know about Nationwide’s Vanishing Deductible option is that it isn’t available everywhere. Some states do not allow Nationwide to offer this option to drivers, so be sure you check into what options are available in your state.
If you do have access to the Vanishing Deductible option, Nationwide tries to make it easy to understand and to add. They offer it as a stand-alone option and you are not required
to have a specific coverage package to apply for eligibility. You do have to have a coverage option that calls for a deductible and the two obvious ones are collision and comprehensive. Here again, Nationwide makes it a little easier in that you can choose to add either collision or comprehensive (many car insurance companies force you to have both, even if you want just one.)
If you elect to add Vanishing Deductible to your
Nationwide car insurance plan, you’ll be charged a flat rate (usually around $60-per year for the first car and $10-per year for any additional cars.) Once in place, Nationwide will immediately and automatically reduce a select deductible by $100. For each year you keep the option in place and go without an accident that generates a claim on the option where the deductible is “vanishing”, Nationwide will reduce that deductible by another $100. Nationwide caps the total you can have a deductible reduced at $500.
An example
Let’s say you have a Nationwide car insurance plan with comprehensive coverage that comes with a $500 deductible (which is, by the way, the average deductible for a Nationwide comprehensive option.) You add Vanishing Deductible and you go a full year without filing a comprehensive claim. A couple of weeks into your second year with Vanishing Deductible, a tree falls on your car requiring $1,800 in repairs. Instead of having to pay $500 out-of-pocket before Nationwide starts reimbursing your expenses, you only have to pay $300 out-of-pocket. In this case, the $120 extra you’ve spent to add the option has paid for itself.
If you do have to file a claim while on the Vanishing Deductible option, Nationwide doesn’t make you go all the way back to square one to start earning credits against deductibles. You still get the original $100 reduction in a deductible for having and maintaining the option. In the above example, say a hailstorm wreaks havoc on your car three months after the tree incident, leaving you with $900 in new repair costs. Your out-of-pocket expense on that claim would be $400 (not the full $500 deductible you originally selected for your comprehensive coverage.)
Is this a bargain?
Take a few moments to pencil out whether adding Vanishing Deductible to your Nationwide car insurance plan is a bargain. A good way to go at this is to add up all of what you have to pay to get a Vanishing Deductible. First, you will need to have a coverage option in place that comes with a deductible. In most cases, this will be a collision or a comprehensive option (or even both), and take some care in determining if you even need any of those options on your car.
A simple rule of thumb for determining if adding collision or comprehensive is a value-added idea is to total the premium increase you will pay for adding the option over the time you’ll have that car, plus add in the deductible you’ve chosen. If this total exceeds the current market or cash value of the car you’re insuring, it probably isn’t a wise financial move to add that option. In the case of Nationwide, adding either collision or comprehensive options to your policy will add an average of $20-$25 in monthly premium to your bill (for each separate option and depending on the state where you live and other options you have in place.)
One other thing to factor in with the Vanishing Deductible option is that it is capped at $500. If you have a $1,000 deductible, the most the option can offer you is to cut that deductible in half. If you happen to have a $500 deductible, you’ll spend more than you will ultimately save in just over eight years.
Generally speaking, Nationwide’s Vanishing Deductible option is a little more flexible and forgiving than many of its competitors, but it’s still an option that you’ll want to carefully consider before adding it to your policy.
(Note: this article is intended solely for informational purposes and is in no way a promotion or a solicitation. The author has no affiliation with Nationwide or with any other car insurance provider.)
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