An optional auto insurance coverage some people find out they need too late, after they’ve had a claim, is Rental Reimbursement. Some insurance companies call this coverage Loss of Use or Transportation Expense. The benefits of this coverage may be different among insurance companies, and some insurance companies offer more generous coverage, like Liberty Mutual with its Unlimited Rental Coverage, as a way to attract customers.
My blog post today will give you information to help you decide if you need this coverage, what you should consider before buying it, how the coverage can differ among companies, and know the financial consequences of not choosing this coverage option.
Many people asking for “full” coverage are surprised they don’t have Rental Reimbursement coverage when they have a claim. Full coverage is a slang term interpreted as meaning Comprehensive coverage and Collision coverage. It does not mean you have every coverage available.
Even if you have every coverage, there are still deductibles, dollar limits, and exclusions, which will not cover all the costs or expenses you have, if you are in an auto accident or your car is damaged.
I’ve received a call from a customer after a car accident, where the customer had over $1,000 of uncovered rental car expense. The customer did not understand why this expense was not covered, when the customer asked for full coverage. The customer had Comprehensive coverage & Collision coverage, but not Rental Reimbursement coverage.
When you call for an auto insurance quote, or before you buy a car insurance policy, a good agent will review & explain all coverage available to you, so you can decide on the level of coverage best for you.
Many agents don’t review your coverage when quoting you or before you buy the policy.
If you say you want full coverage, or the proper terms, Comprehensive coverage & Collision coverage, the agent may confirm the dollar amount of the deductibles you want, but the agent may not discuss Rental Reimbursement.
Some agents automatically include Rental Reimbursement, at the amount of coverage the agent thinks you need, without asking you.
Many other agents, wanting to get your business by quoting you the lowest price they can offer you, do not include it at all.
It’s okay to decide you don’t need Rental Reimbursement, but to have it included or excluded without you knowing about it, gets you to pay for coverage you don’t need, or worse — not having a coverage you need, without you being aware it was an option for you.
Unexpected costs not covered by insurance when a claim occurs makes people feel ripped off by their insurance company.
Do you need Rental Reimbursement Coverage?
If your car was not drivable after an accident, or the car is in the shop after a claim where it was damaged, would you need to rent a car? If the answer is yes, you should consider Rental Reimbursement. If no, you don’t need it.
If you do a lot of driving, need your car to get back & forth to work, have to drive to different locations during the day, or frequently use your car to travel away from home, you may understand why you should consider buying Rental Reimbursement coverage.
However, many people make the decision they don’t need Rental Reimbursement too quickly. They assume they can use a family member’s car, or use public transit, and make due for the short period of time they might need to rent a car.
But what people decide they need, once they have had claim, can be very different from what they thought they needed, when they were buying a policy, didn’t think they will ever need the insurance, and they wanted to save money.
If you have access to another car, skipping Rental Reimbursement might be the best decision. This works well if you have a reliable extra car, or your purchase agreement for your car provides a rental when you need it.
But if you have to share the car you plan on using with other family members, think about how this will impact your family, and the places you need to go. If you plan on using public transit to get to work, are there other places your family needs to go, which will require a car.
The average period of time for car repair is about two weeks. What if your car is not drivable, and your repair shop has to wait a week or two to get a needed car part? Two weeks is an average. Some car repairs can take only a few days, and other can be a month or longer.
If the cost of a rental car is $35 a day, and your car takes 30 days to repair, it could cost you $1,005 out of your own pocket.
If you can afford it, I think the best way to go is to have several thousand dollars in your emergency fund, to pay your insurance deductibles and uncovered insurance costs ,like the need to rent a car when you have a claim.
Your car could easily be out of service for mechanical reasons, which would not be covered by Rental Reimbursement, so having the money handy in a savings account could help you out when Rental Reimbursement would not cover you.
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Yet some people live paycheck to paycheck, so this is not an option for them.
The cost of Rental Reimbursement every 6 months is usually about $20 to $40 (Maybe more for higher limits.) You may decide the cost is small enough to buy the insurance coverage, rather than pay for the cost of a rental car yourself if you need it.
When are you covered by Rental Reimbursement?
Rental Reimbursement does not apply, if your car is out of service for reasons other than an insured claim covering the damage to your car, such as mechanical breakdown.
Some insurance companies require you to have both Comprehensive and Collision coverage on your car to have Rental Reimbursement. This makes sense, because if you don’t have Comprehensive & Collision insuring your car against damage, you won’t have a covered claim where Rental Reimbursement would apply.
Some insurance companies will allow you to have Rental Reimbursement with only one Physical Damage coverage – either Comprehensive alone, or Collision alone.
So, if you have an older car where you have dropped Collision, but kept Comprehensive, and you want Rental Reimbursement, in case your car is not drivable or in the shop due to a Comprehensive claim, shop for an insurance company allowing it.
WARNING: If you decide to drop Collision coverage on a car which also has Rental Reimbursement, have your agent or insurance company check the wording in your policy to see if not having Collision invalidates the Rental Reimbursement coverage. You want to avoid the insurance company accidentally charging you for Rental Reimbursement when you can’t collect on it.
Gas, Mileage, and other expenses, like insuring the rental car, are not covered by Rental Reimbursement.
Things to consider when choosing Rental Reimbursement Coverage
1. The Daily limit. The cost of your Rental Reimbursement will depend on your daily limit. You want to buy enough to cover the daily rental expense of the type of car you need. The daily limit can be as low as $15 dollars a day, and you may be able to buy limits up to $75 a day.
If you need transportation only for you to get back and forth to work, you may be able to rent a compact car for $25 a day. If you need an SUV or luxury car, you will need a higher limit. Figure out what type of car you would need to rent, and check the rental costs in your area.
2. The Total Dollar Limit per claim. You may choose a daily limit of $25 a day for Rental Reimbursement. You will also have a total dollar limit per claim, such as $750.
3. The time limit. Some insurance companies will restrict the days of Rental Reimbursement to 30 days. If you have a daily limit of $25 for a rental, and a total limit of $750, and you know it’s going to take 45 days to get you car repaired, your Rental Reimbursement will stop paying you after 30 days, even if you have not reached the total dollar limit. You may want to choose an insurance company without a time limit.
For example, you know it will take 45 days to get your car back, so you rent a car costing $15 a day. At the end of 30 days, your have $450 of Rental Reimbursement expense.
If you have a 30 day limit, you get $450 and the coverage stops after the 30th day. If you don’t have a time limit, and the total dollar limit is $750, you will have $300 still available, subject to your daily limit, until your car is repaired.
Rental Reimbursement applies when your car is not drivable, or if it is drivable, when it is in the shop being repaired.
You are paid Rental Reimbursement based on your actual cost of the car you rent. So, if your car is not drivable after an accident, and you do not rent a car, you will not be paid Rental Reimbursement. If you have a limit of $35 a day, and you pay $25 a day, you will be reimbursed only for the $25 a day you paid.
Considering Rental Reimbursement when shopping for car insurance
Some insurance companies have better and/or less expensive Rental Reimbursement options. In some states, with some of their auto insurance products, Liberty Mutual offers Unlimited Rental Coverage, which has a daily limit, but no total limit or time limit.
Broader Rental Reimbursement coverage is better, but if your overall cost of auto insurance is $100 more a year, is it worth it? I don’t think so.
Determine the insurance coverage you need, then shop with all the leading insurance companies to quote you the same (or comparable) coverage. Make note of any extra benefits available from certain insurance companies, such as broader Rental Reimbursement coverage.
Once you have all the quotes, compare prices. If an insurance company offers a good price, and better Rental Reimbursement coverage, they might be the best option for you. Don’t forget to check the insurance company’s complaint record on my website before you buy their insurance. It does not help much to have broader coverage if you will receive poor service, or have trouble getting a claim paid.
Do you have Rental Reimbursement Coverage on any of your cars? Tell me about it. Please leave a comment on my facebook page. Follow me on Twitter for important insurance consumer news and new blog entries at CarInsWatch.