If you carry Rental Reimbursement coverage on your Personal Auto policy, it will pay for a rental car while your vehicle is disabled after a covered loss. Also known as Transportation Expense, this coverage will typically kick in immediately if your vehicle is not drivable after the accident. If your vehicle is drivable, then Rental Reimbursement applies for the time that it is in the shop being repaired.
Rental Reimbursement coverage is usually sold with a daily limit and an overall limit. Frequently offered limits include:
If you have this coverage on your vehicle, most insurance companies in this area will offer to set up a reservation and direct bill with Enterprise. This means all you have to worry about is a refundable security deposit and any rental car fees or taxes that exceed the limits that you purchased. Of course, you also have the option to obtain a rental car from another provider you receive and submit the receipt for reimbursement if the provider isn’t willing to bill your insurance carrier directly.
How big of a limit should you buy? In our local area, we find that $30 per day is probably a good minimum. $30 tends to be about enough to cover the fees and taxes for the least expensive rental car option with Enterprise’s insurance rates. (Enterprise offers discounted rates for insurance claims.) If you currently drive a bigger vehicle and want that same option for a rental, then you should probably go up to $40 or $50 a day.
How long will the insurance company pay for your rental car? If your vehicle is being repaired, typically until your vehicle’s repairs are complete. If your vehicle is a total loss, then usually the rental car ends shortly after the insurance company pays your claim. (Coverage will also end if you exceed your total available limit, which doesn’t happen too often.)
Rental Reimbursement coverage is relatively inexpensive. On average, it costs $1 to $4 per month to add it to a fully insured vehicle. Some carriers include a nominal amount of coverage for free, most frequently $20 per day. Currently one of our carriers that we represent, IMT, includes a $30 daily limit automatically for all fully insured vehicles, as a value-added benefit of being insured with them.
It’s important to note that Rental Reimbursement only kicks in if there is a loss covered under your policy. So if you hit a deer, get in an accident, have your vehicle stolen, etc. But if your transmission goes out, your Auto policy won’t cover the repair; which means it also won’t pay for a rental car while they put a new transmission in your vehicle.
Sometimes clients will say that they don’t need Rental Reimbursement because it is already covered under their auto warranty. But, more than likely, any rental car coverage in your warranty only kicks in if there is a warranty claim. This means that if a mechanical issue disables your vehicle, you have a warranty claim for the repair and the rental car. If an accident disables your vehicle, then you have an insurance claim for the repair and the rental car. In general, I’d say that vehicle warranties and insurance coverage compliment each other but don’t duplicate benefits.
Whether you choose this coverage is not a decision that will make or break you financially. However, I tend to recommend it for anyone who doesn’t have a backup vehicle available, for the simple reason that I know you will be quite a bit happier with your insurance at claim time if we can put you into a free rental car. It’s just an added expense that most people aren’t keen to absorb in addition to their deductible after an accident.
Should you add Rental Reimbursement coverage to your fully insured vehicle(s)? Consider what you would drive to get to work, to take the kids to school or to get to your appointments if your vehicle was disabled and/or being repaired after a car accident. If you’re not sure you’d have another vehicle available, it’s probably worthwhile to add this coverage to your policy.
Ken Cobb is owner of Pine Country Insurance and has been active in the insurance industry for over 15 years. Meet Ken.
Coverage descriptions found in this blog are summaries provided for general educational purposes and cannot fully detail the terms, conditions, limitations or exclusions of a specific insurance policy. Please read your policy carefully.