You’ve just been in a fender bender. Your car is still drivable, but it’s got a nasty dent and a broken headlight. You take it to the body shop, and they tell you it’ll be out of commission for a week. How will you get to work? Pick up the kids from school? Go to the grocery store?
This is where rental reimbursement coverage comes in. But is it worth the extra cost on your car insurance policy? Understanding the specifics of this type of insurance is key to deciding whether to include it in your coverage.
Note: These tips should not be considered official insurance guidance. Please consult an insurance professional or broker when making decisions regarding insurance.
What Is Rental Reimbursement Coverage?
Rental reimbursement coverage, sometimes called “loss of use” coverage, is an optional add-on to your car insurance policy. If your car is damaged in a covered accident, this add-on pays for a rental car while your vehicle is being repaired or is deemed a total loss. It’s designed to minimize the disruption to your daily life when your primary mode of transportation is out of commission due to a covered event.
How does it work?
Typically, your insurance company will have a network of approved rental car agencies. Once your claim is approved and your car is in the shop, you can arrange for a rental. The coverage usually has daily limits and a total maximum limit per claim.
This means that if your daily rental costs $45 and your coverage is $40/day, you’ll be responsible for the extra $5 per day. The coverage period also has a limit, often 30 days.
It’s important to understand that rental reimbursement coverage generally doesn’t kick in if your car breaks down due to mechanical failure, needs routine maintenance, or if you simply want a rental for a vacation. Like all auto insurance claims, the rental must be necessitated by a covered incident under your collision or comprehensive coverage.
Who Needs Rental Reimbursement Coverage?
While rental reimbursement coverage can come in handy in a pinch, it also comes with an additional cost. That’s why it’s important to evaluate your situation to determine if it’s worth the price.
Consider getting it if:
- You rely heavily on your car for daily activities: If you commute to work, transport children, or have limited public transportation options, being without a car can be a significant hardship– and even cost you more money.
- You don’t have a spare vehicle: If your household only has one car, rental reimbursement becomes much more critical if your vehicle is out of commission.
- You can’t easily afford unexpected rental car costs: Rental cars, especially for extended periods, can be expensive. A week-long rental could easily run several hundred dollars. If an unexpected bill like that would strain your budget, this coverage offers peace of mind.
- You want to minimize hassle: Dealing with a car accident is stressful enough. Knowing you have a rental car lined up can alleviate one major headache.
You might be able to skip it if:
- You have a spare car: If there’s another vehicle in your household that you can use, the need for a rental car is diminished.
- You have easy access to public transportation: If buses, subways, or ride-sharing services are readily available and convenient for your needs, you might not require a rental.
- You can comfortably afford a rental out-of-pocket: If an unexpected several-hundred-dollar expense won’t cause you financial distress, you might prefer to self-insure for this specific risk.
- Your car is old and has a low value: If your car is worth very little, the cost of repairs might quickly exceed its actual cash value, leading to a total loss. In such cases, your rental reimbursement might be cut short, and you’d need to replace your vehicle sooner. However, even in this scenario, it can still provide temporary transportation while you’re car shopping.
The Cost of Rental Reimbursement Coverage
The good news is that rental reimbursement coverage is typically one of the more affordable add-ons to your car insurance policy. The exact cost varies depending on your insurer, your location, the limits you choose, and your overall driving record. While some drivers report an increase of only $50 for the policy term, others report paying hundreds– up to $700 for six months.
When deciding whether to add rental reimbursement, ask your carrier how much it would cost. Then you can compare it to the potential cost of the rental car to decide whether the savings outweigh the premium.
Making the Decision: Is It Worth It For You?
Ultimately, the decision of whether or not to add rental reimbursement coverage to your policy comes down to a cost-benefit analysis based on your individual circumstances.
To decide what’s right for you, ask yourself these questions:
- How dependent am I on my car for daily life? If being car-less is a major inconvenience, the value of this coverage increases.
- Do I have alternative transportation options? If you have a second car, good public transport, or family/friends who can help, you might not need it as much.
- What is my financial comfort level with unexpected expenses? Could you easily absorb the cost of a rental car for a week or two without financial strain?
- What are the specific limits offered by my insurer, and what is the cost? Get a clear quote and compare it to potential rental costs.
For many drivers, especially those who rely heavily on their single vehicle and want to avoid unexpected financial burdens, the relatively low cost of rental reimbursement coverage makes it a worthwhile investment. It provides peace of mind, ensuring that a car accident, while disruptive, won’t completely derail your daily routine.
Before you make a final decision, always get a personalized quote from your insurance provider. Discuss the different daily and total limits available, and choose the option that best fits your needs and budget. Investing a small amount upfront can save you significant stress and expense down the road.
