Nationwide's Vanishing Deductible: Is It Worth It?

May 06, 2014

After getting into a minor accident, you’re shocked to find out that you’re responsible for paying $1,000 toward the repairs. That thousand-dollar deductible didn’t sound too bad when you signed up for your policy — but then again, you weren’t exactly planning to crash your car.

If you had signed up for Nationwide’s Vanishing Deductible program, your out-of-pocket expenses might have been $500 cheaper. But is this program a good choice for most drivers?

How Does a Vanishing Deductible Work?

The deductible on your auto insurance is the amount you have to pay for repairs before the insurance kicks in and pays the rest. Average car insurance deductibles range from $250 to $1,000. Typically you can opt for a lower deductible and pay higher premiums, or raise your deductible and get lower rates.

Nationwide’s Vanishing Deductible program lets you avoid the painful prospect of paying a high deductible. For every year of safe driving, Nationwide knocks $100 off your deductible, up to a maximum of $500. If you do get into an accident, you pay the reduced deductible and then your discount returns to the $100 level. However, you pay extra up front for this benefit — about $60 per year for your first vehicle and $10 per year for each additional vehicle.

Is Nationwide’s Vanishing Deductible program worth it?

Opting for the Vanishing Deductible program is an interesting gamble. You’re essentially betting that you won’t get into an accident for a few years, but that it’ll eventually happen. If you make it to year five of safe driving, you’ve spent a minimum of $300; but if you get into an accident that year, you’ll come out $200 ahead.

The Vanishing Deductible does grant some peace of mind, because you know you won’t have to come up with a hefty deductible out of the blue if you do get into an accident. However, it’s not the best way to save money in the long run. If you know you’re a safe driver, you may be better off opting for a high car insurance deductible instead of one that shrinks over time, which will save you money on your premiums. Remember, too, that Nationwide offers a safe-driver discount of up to 10 percent if you have no at-fault accidents or major violations for at least 5 years.

One way to think about the value of a vanishing deductible is this: Is it more beneficial for the customer or for the insurance company? “Insurance companies are smart; they would not offer such a feature if they lost money on it,” Eric Stauffer, founder of Expert Insurance Reviews, tells Bankrate. Drivers who opt for a vanishing deductible may end up paying for a discount that goes unused or even paying for minor repairs themselves so they don’t lose the deductible discount. Both scenarios benefit the insurer, not the customer.

Two other insurers that offer vanishing deductibles

The Hartford’s Disappearing Deductible program provides more modest rewards than Nationwide. The Hartford reduces the collision deductible by $150 after having a clean driving. Another $50 is taken off the deductible for each subsequent year. It costs about $60 per year to get the benefit through the Advantage PLUS program, but you also get accident forgiveness and other deductible discounts.

Allstate offers a program called Deductible Rewards through its suite of Your Choice Auto options. Deductible Rewards is similar to Nationwide’s Vanishing Deductible, reducing the collision deductible by $100 per accident-free year, up to $500.

The insurance laws of the state you live in may affect your shrinking-deductible program. In New York and Pennsylvania, for instance, the car insurance deductible can’t fall below $100.

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