Add-on coverages, like rental reimbursement, may make sense for you and your specific needs. At the end of this resource, you will be well-equipped to decide if this add on coverage is right for you from both a coverage perspective and a financial perspective.
Those who have read our resources have heard us talk about rental car insurance on occasion. Rental reimbursement coverage is completely different. Rental car insurance refers to your actual coverages in terms of the liability, collision and comprehensive portions of your policy, as well as the various non-insurance products offered by car rental companies.
So, what is rental reimbursement and what does it do?
Rental reimbursement is of course an add-on to an auto policy. In insurance lingo, that's something referred to as an insurance rider. A rider is just a purchased addition to a basic auto policy that expands the coverages of someone who purchased a policy. Riders are relegated to coverages that are not typically sold as stand-alone product. One must have an auto policy to which the rider is attached.
Rental reimbursement does what it sounds like – it provides you with coverage that ensures in the event your car is damaged or stolen, you won't be out of pocket for a rental car. If you’re involved in an accident and carry this type of coverage, your insurance company will issue you a rental car to drive while your car is being repaired—free of charge. Most insurers will even bring the rental to you at your home or place of business. If your car is stolen, your insurer will offer you a rental for a set period of time, either until your vehicle is recovered or your coverage runs out.
Here's a scenario in which you'd want rental reimbursement: You've been involved in an accident that has rendered your car inoperable – it cannot be driven. Your insurer has deemed the automobile repairable, although there is significant body and mechanical damage that will require multiple days to fix. Even worse, the repair shop you want to perform the repairs has a significant backlog of over a week before they can even begin to get started on your car.
So you're going to have to rent a car until yours is repaired, which likely will be two weeks minimum. The cheapest car rental place offers a sub-compact model for $15.99 per day, not counting your state's tax or other fees that may be imposed. Plus, you're used to driving a larger car, and one comparable to that will be $24.99 per day, plus taxes and fees.
The cheapest option will cost you $223.86 plus taxes and fees over the time your car is being repaired. The option most like the car you currently drive will cost you $349.86 plus taxes and fees. Add these totals to the deductible amount you're likely out, and suddenly, you could be looking at a significant outlay of cash in a short period of time that you might not have budgeted for.
Even without the extended period of time offered in our example above, its important to keep in mind that rental reimbursement is normally a low cost add-on, usually costing less than $30.00 over the course of a year on an auto policy. Actual rental reimbursement riders will vary with each auto insurer offering it. They're normally low cost additions to a policy, and often are available with different levels of coverage, priced by the amount of coverage your rental reimbursement provides in daily and total amounts for each time it is used.
Our example does give some idea of how adding a rider for rental reimbursement can pay off for policy holders. Due to the low cost packages most auto insurers provide, we do believe rental reimbursement can benefit many drivers.
If you do obtain a quote on a new policy, or are planning on renewing your current policy, be sure to inquire about the types of rental reimbursement the insurer offers. The rider may be offered as part of a package with other riders, so be sure to ask about any discount packages that may be available as well.