Nationwide Insurance is spending some serious advertising dollars on their new “Vanishing Deductible” option, so let’s take a closer look at the seemingly magical program.
We’ve got to admit; it has a nice ring to it and sounds like a novel idea.
But let’s apply some insurance industry insider knowledge to see if the vanishing auto insurance deductible makes it worth your time and effort to switch to Nationwide, or worth your money to stay with them if they already insure you.
FYI, Nationwide is certainly not the first company to offer this option on an auto insurance policy, they are simply following other insurers’ leads to keep up.
A similar program would be the Allstate Safe Driving Bonus Check, where Allstate pays you back premium for being a “safe driver.”
How the Nationwide Vanishing Deductible Works
Nationwide, on top of offering to take $100 off your deductible for signing up with them, will lower your deductible $100 each year you are a “safe driver.”
Let’s say you opt for a $500 deductible, which is fairly common for auto policies. For each year of “safe driving,” your deductible is reduced by $100.
So after one year of good driving, your deductible would drop to $400. And five years of safe driving would result in a $0 deductible. Hooray!
We’re going to assume that “safe driver” means no tickets or accidents. The Nationwide website does not make it clear whether you would lose your “safe driver” status in the event you are involved in a “not-at-fault” accident (one in which another driver was ticketed or determined to be negligent in causing an accident).
It doesn’t seem like it would be fair to disqualify you from the “safe” driver program for someone else causing an accident. Keep in mind though; MANY insurers charge additional premium for accidents you are involved in whether or not you caused them. Perhaps Nationwide should call this the “Lucky Enough to Not Be Hit by Anybody for 4 Years Vanishing Deductible” if that’s the case.
Their website also does not make a reference as to whether or not the Vanishing Deductible applies to an underinsured or uninsured motorist property damage claim. Something you may want to ask the agent if you are intrigued enough to contact Nationwide for an insurance premium quote.
What we do know is that the maximum credit you may receive is $500. This means those who opt for the $1,000 deductible in order to save premium dollars will never see their deductible completely vanish…although getting the premium discount for the higher deductible and only paying a max of $500 after qualifying for the maximum credit would be a good thing.
But in our opinion, the magic trick where the tiger only vanishes half-way is pretty lame.
Additionally, you have to pay for the Vanishing Deductible option, to the tune of $60 a year for the first vehicle on your policy.
So in reality, you’re only “saving” $40 a year in reduced deductible. And you’re not actually saving anything at all if you don’t file a claim. You’re simply prepaying for a lower deductible that may never ultimately be used.
Bottom Line: Is It a Good Deal?
If your ultimate goal is to have adequate coverage, whether liability only, or full coverage with all the bells and whistles…and get it at the best price, this may be a complete waste of your time (and money).
For example; if you can get the same auto insurance coverage for $100 less from a different insurer for five years, it’d be completely worthless to opt for Nationwide in order to see your deductible vanish, especially if you don’t file any insurance claims anyways.
Every other commercial out there says we can save an average of over $300 by switching from one insurer to the next (15 minutes could save you 15%). If that’s the case, sticking with ANY of them for five years in the hopes of getting into an accident and saving money on the deductible is nuts!
Remember, a lower deductible only helps you in the event of an accident, whereas a lower price for insurance is direct and guaranteed savings.
This goes back to paying to insure your insurance, similar to accident forgiveness, which sounds like a losing endeavor.
If you are a savvy insurance consumer, you understand most of what you see on television and hear on the radio is solely marketing devised to sway us to make a decision on emotion rather than using critical thinking…this may appear to be another such gimmick.
Don’t believe us? Ask yourself what Lebron James (apparently a State Farm advocate) could possibly know about insurance (or any other promise for that matter – Cleveland fans know what we’re talking about). Insurance is simply a promise by the insurer to pay for our claims in the event of a covered loss.
While it may not be appropriate to use a word like “commodity” to describe insurance, it’s very close. This means there is no company out there that offers more comprehensive coverage than any other insurer. It sort of boils down to price and perhaps service.
Although it is not recommended you switch every year to save $20 bucks, you should at minimum look around every other year to make sure your loyalty to a billion dollar corporation isn’t costing you.