What Is A Disappearing Deductible, And Why Should You Care?
You’re driving through town when something distracts you. When you realize you’re not watching the road, your eyes dart back to the stopped car in front of you. Your foot mashes the brake pedal. You hear the tires screech and feel the car rapidly decelerate, but unfortunately it’s too late. You’ve smacked in to the car in front of you, and no matter what, you’ll need to pay for damages. Thankfully, you have insurance with a $500 deductible plan, which means your out-of-pocket will only be five bills before the insurance coverage kicks in.
But hold on a minute.
You recently signed up for a program with your insurance company referred to as a “disappearing deductible.” You’ve been driving three years without incident, and your company generously offers a $100 per year credit, taking your deductible all the way down to $200. When damages reach up into the thousands, you can see the benefit!
So far, companies like The Hartford and Nationwide have gained quite a bit of recognition with their “disappearing deductible” plans. (Nationwide’s is referred to as “Vanishing Deductible.”)
As a rep from The Hartford told Fox News in a 2011 article, “We think this is a great reward for anyone who has a good driving record. I think people see the value in it. They like the idea.”
The $100 credit is Nationwide’s system. The Hartford’s differs somewhat offering a $50 per year discount after three years of good driving (either with The Hartford or your previous insurance company).
“If you continue to have a clean record, you could go all the way down to zero and not have a deductible at all,” said Lisa Lobo, the company’s vice-president and consumer insurance expert.
With Nationwide, an accident will take you back down to a $100 credit after you use your reduced deductible. However, it tops out at $500, which doesn’t quite allow for a vanishing deductible to those who’ve chosen a higher one (think $1,500) in order to lower premiums. However, maxing out your vanishing deductible would significantly reduce your out-of-pocket in the event of an accident.
The Hartford’s program takes a little longer to kick in, but once it’s in, it is ongoing and only maxes out at whatever your deductible is. The $50 per year, however, makes it take twice as long to build up the credit that Nationwide offers.
Either way, the programs have their advantages, and they give drivers a way to benefit from something that they’re already doing anyway — avoiding accidents and moving violations.
The only caveat…
If you did have to find a drawback to the disappearing deductible, it’s the fact that it’s a relatively new concept and many people aren’t aware it exists. Furthermore, since it is new, many companies may not have adopted a similar program just yet.
In order to make sure you’re not missing out, I would encourage you to contact your insurance agent immediately and ask her about the option, especially if you’ve demonstrated a clean driving record for a number of years and are a low-risk driver.
If you’ve already put together a clean history, you might as well start benefitting from it!
A disappearing deductible may not be available to everyone, and if you have a spotty history, it may not do you much good at first. But if you resolve to become a safer and more attentive driver — or if you’re already there — it can be an unsung benefit that saves you a lot of money in out-of-pocket expenses should the day come when you actually need to use it.