'Disappearing deductible' car insurance: What's the catch?

No one else may listen when you brag about your perfect driving record, but your car insurance company is all ears.

Many offer discounts that reward safe motorists who rack up year after year of crash-free driving. These provisions go under various names -- The Hartford's is called "disappearing deductible," while Nationwide has the even more magical-sounding "vanishing deductible" -- but they offer similar benefits.

"We think this is a great reward for anyone who has a good driving record,'' says Lisa Lobo, a vice president and consumer insurance expert at The Hartford. "I think people see the value in it. They like the idea."

Some insurers promote them with TV commercials like Nationwide's, which turns that boulder into a pebble. Beguiling imagery, but what are the facts behind the pitch? Here's what to expect using The Hartford and Nationwide as examples. (Check with your carrier; it probably has something comparable, with varying qualifications and benefits.)

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Lobo says The Hartford will knock $50 off the deductible if you've been accident-free for three years, either with The Hartford or, if you're a new customer, your previous insurance company. Also, you can't have any moving violations for three years. Once qualified, $50 will be trimmed from the deductible every year without a ding to your name.

"If you continue to have a clean record, you could go all the way down to zero and not have a deductible at all," notes Lobo.

Nationwide's "vanishing deductible" takes $100 off the top and $100 each year you go without an accident or moving violation, according to Elizabeth B. Stelzer, a spokesperson for Nationwide. The company puts a $500 limit on how much can ultimately be stripped from the deductible.

What's the catch?

The most obvious catch is that it costs more. Car insurers usually offer deductible discounts through their higher-dollar plans. The Hartford, for example, includes "disappearing deductible" with its "Advantage Plus" package, which adds about 5 percent or 6 percent to your bill but also includes accident forgiveness, according to Lobo.

Nationwide's plan is simpler. Stelzer says you can get it for $60 a year ($30 for each six-month term) for your first vehicle and $10 for each car you add. Nationwide, she says, decided on the flat fee to make its coverage "easier for consumers to understand" in an often confusing array of options offered by insurers. A "vanishing deductible" can be bought separately, meaning you don't have to opt for a package to get it, Selzer says.

What happens to the "disappearing deductible" if you're in an accident or get a moving violation?

Lobo says you go back to square one -- your original deductible is reinstated and you have to be clean for three years for it to be reduced again. Keep in mind that it doesn't make any difference who or what caused the mishap. You go back even if it's not your fault.

There's a small difference at Nationwide. Stelzer says policyholders revert back to the original $100 off the deductible if they have an accident or violation.

Do the math

Once you've driven five accident-free years with Nationwide, your deductible is reduced by $500, the maximum - but you've paid at least $300 for the privilege. If you drive 10 trouble-free years on the program, you'll have paid $600. That's more than the cut in your deductible.

If you're a driver paying something close to national average of $1,450 or so for your car insurance, the annual increase in your Hartford premiums might run you $70 to $85 for a policy that could eventually drop your deductible to zero.

Is that a good deal?

It might be. You could simply open a savings account, bank a monthly amount toward your deductible and cut out the middleman. If you don't trust your ability to keep your mitts off the cash but still like the idea of a “vanishing deductible,” you might enroll in one of these programs but consider raising your deductible -say, from $500 to $1,000. Typically that would cut your full-coverage premiums by about 15 percent.

But you'd still need to have money in the bank to cover the difference between your part of the deductible and what hasn't vanished.

The original article can be found at CarInsurance.com:'Disappearing deductible' car insurance: What's the catch?

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