Ask Andy: Vanishing Deductibles

(WMC-TV) - I'll bet you a C-note toward your insurance deductible that you've seen this commercial:

Nationwide's marketing campaign for its "vanishing deductible" advertises if you carry the benefit on your policy -- and don't file a claim for a year -- $100 "vanishes" from your deductible. The benefit continues to deduct $100 annually, as long as you maintain a clean driving record.

What the ad doesn't reveal is the benefit can cost Nationwide's policyholders an extra $60 a year in premiums, according to Bottom Line Personal magazine and J. D. Howard, executive director of the Insurance Consumer Advocate Network (

That means most of what you would earn in a deductible discount 'vanishes' in the form of an extra fee on your premium.

"What is today referred to as 'vanishing' deductibles had historically been known as 'diminishing" or 'disappearing' deductibles," said Howard. "In the past, those claims were paid on the basis of 111% of the amount over the base deductible.

"My experience with the Allstate underwriting dept taught me the 'diminishing' deductible premium was from six percent to 15 percent higher than the standard deductible based upon other underwriting factors."

Elizabeth B. Stelzer, public relations consultant for Nationwide, e-mailed this statement:

"Nationwide Insurance is proud to offer options like Vanishing Deductible that allow customers to tailor their insurance coverage to meet their individual needs. With the Vanishing Deductible option customers immediately receive a $100 deductible reward. In addition, this deductible reward will be increased another $100 each year the customer is accident free, up to a maximum of $500. For this feature customers pay $30 for the first vehicle and $5 for each additional vehicle per policy up to a maximum of $45.

Nationwide is transparent about the cost of this feature making it easier for customers to talk with their Nationwide agent to determine if Vanishing Deductible would be beneficial for them. When determining if this feature is cost beneficial, people should consider the deductible reward can be used on many types of claims including deer hits, windshield replacement, hail, theft and other collisions (even if you run into your own garage door). Further, the $100 deductible reward can be utilized multiple times throughout the year on all vehicles on the policy, so policies with 3 or more vehicles may benefit more from this coverage. This is because even after being utilized, the reward never goes below $100. In 2006, Tennessee was selected as the first state where Nationwide introduced this feature. The customer response has been positive and nearly two-thirds of all Nationwide auto customers in Tennessee have selected this option."

Howard said policyholders should only consider vanishing deductibles if they already carry high standard deductibles. He said the benefit's cost is justified if it helps to drop an already burdensome deductible.

Otherwise, Howard said policyholders should ask their agents about accident forgiveness, new car replacement or better car replacement benefits.

"(Those features) are actuarially predictable, and all are features that justify additional premium charges," he said.

My advice is talk to your insurance agent. Ask if your standard deductible is high enough to warrant the additional cost of a vanishing deductible.

Better yet, ask how you might get that premium to vanish a little bit.

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