Smart Drivers Pay Less for an Auto Rental: Reimbursement Coverage 101

Have you ever considered what would happen if you were in an accident?  Most people think that their auto insurance will cover all associated costs – but that may not always be the case when it comes to renting a temporary replacement vehicle.

What is rental reimbursement coverage?

Rental reimbursement coverage is an inexpensive, optional coverage that many auto insurance providers offer in addition to a standard auto insurance policy.

What does it cover?

Rental reimbursement coverage will usually pay for a rental after an accident or other insured damage, such as weather related incidents.  It may be subject to a daily or per accident limit, but it provides a cushion for the costs of a rental.  It does not cover mechanical issues, if your car breaks down, but every policy is different.

Do I need it?

It depends.  Depending on the severity of the accident, many vehicles are in the repair shop for up to two weeks after an accident.  A typical rental costs between $200 to $400 per week, and that can add up quickly!

According to the National Safety Council, one in eight drivers will be involved in an accident this year.  Some factors to consider when you’re deciding whether you need rental reimbursement coverage:

• Age.  According to a July 2008 Report to Congress assembled by the National Highway Traffic Safety Administration, young drivers between the ages of 15 and 20 had the highest level of crashes among licensed drivers, more than twice as many as any age group over 35.  It’s important to consider that even if you are not part of the 15 to 20 age bracket, you may have a young driver who is on or will soon be added to your policy.
• Lifestyle.  How dependent are you on your vehicle?  Do you have access to alternate transportation?  Consider how much it will affect your daily routine to be without a vehicle for up to two weeks, since not all areas have adequate modes of public transportation.
• Driving Habits.  Are you a safe driver?  Certain behaviors make it more likely that you’ll be involved in an accident, such as sending text messages while driving, speeding or aggressive driving.
• Finances.  Can you afford to cover the costs of a rental vehicle while your car is being repaired?  Although rental reimbursement coverage does slightly increase the cost of your monthly premium, it can be easier to budget for than an unexpected event like an accident.
• Where You Live.  If you live in an area where severe weather, such as high winds, hail or ice storms, are common, you may want to consider rental reimbursement coverage. If a storm knocks a large limb onto your vehicle, it may cause a similar amount of damage to a motor vehicle accident.

What do I do next?

To find out if your insurance provider offers rental reimbursement coverage, you can check your insurance provider’s website, or you can call your agent directly.  If your provider does offer rental reimbursement coverage, some questions you may want to ask are:

• What are the limits (either per day, per accident or both) to the amount of coverage?
• Does this limit me to a particular rental company, or type of rental vehicle?
• When does the coverage typically start – at the time of the accident, or when the car is actually taken into the shop for repairs?
• What is the difference in premium cost to add this to my policy?

Whether or not you elect to add rental reimbursement coverage to your auto insurance policy, it is always a good idea to be informed and educated about your options.

Sources:

http://nhtsa.dot.gov