“Vanishing Deductibles” and “First Accident Forgiveness” — good deals, or not?



Ever wonder about those “vanishing deductibles” or “accident forgiveness” on car insurance policies you see advertised on TV? Sounds like a pretty great deal. But is it? Bel Air News & Views sponsor Chip Schilling of Northern Chesapeake Insurance Services explains the pitfalls to watch out for. For more information, contact Chip at 410-420-3080 or chip@ncins.net. Like Northern Chesapeake Insurance Services on Facebook at http://www.facebook.com/NCINS to find Chip’s regular postings about insurance issues and tips.

Vanishing Deductibles and First Accident Forgiveness seem like pretty great deals… But are they really?

You have probably seen the ads on TV or online… insurance companies offering enticing policy features such as “vanishing deductibles” or “accident forgiveness” on car insurance policies. Seems like a pretty great deal! But are they?

The “vanishing deductible” feature is marketed by insurance companies as a means to encourage safe driving by customers.  The plans take, in most cases, $100 off customers’ deductibles for each claim-free year. For example, if a customer’s deductible starts off at $500 and five years pass without a claim, the deductible vanishes completely and the customer doesn’t have to pay anything when a claim is actually submitted.

The “first accident forgiveness” feature is another offering designed to alleviate the common customer fear of having a large rate increase in the event of an unfortunate accident or claim. We have all heard those stories from someone who had a claim for the first time and their policy premium increased significantly. This is probably one of the most common complaints about insurance companies.

Both of these features sound like a great option, right? Well, maybe… One thing that isn’t clear on the commercials is that these are either additional options to your standard auto insurance policy or you must opt into some sort of “platinum” or “plus” plan (not the standard plan). Since these are not included on your standard policy, the insurance company charges an additional fee for these options or enhanced plans.

When you see these options offered, ask the agent about the additional cost of these features. You will have to crunch the numbers to make sure the offer makes financial sense. One thing to consider is the possibility that you may never use these features, especially if you are someone that rarely files claims. If that is the case, you will want to see what that additional fee amounts to over a 3 or 5 year period of time. It is possible that these policy add-ons can end up costing you more than a surcharge to your policy in the event of an accident, or more than your reduction in deductible over time. One specific item to consider in regards to purchasing accident forgiveness, is that many insurance companies allow you to “earn” accident forgiveness free-of-charge. Often, if you have been an insurance carrier over a 5-year period (this timeframe can vary) of time with no claim activity many insurance companies will automatically give you first accident forgiveness for any subsequent claim.

This is not to say that these options aren’t good for some customers. They are excellent features that are being offered in response to customer requests and complaints to insurance companies; however, you do need to evaluate the cost of these features over time to make sure that it is a good deal for your particular situation. It very well might be!

As always, it is important to have a trusted insurance adviser in your corner. If you don’t have one right now, please contact us here at Northern Chesapeake Insurance at 410-420-3080, or email me, Chip Schilling, directly at chip@ncins.net.  We are an independent insurance agent. We don’t work for the insurance company… WE WORK FOR YOU!


This post was sponsored by Northern Chesapeake Insurance Services.