Despite the growing popularity of ride-sharing services such as Uber and Lyft, demand for rental cars continues to increase. Although there are many different situations in which you may need to rent a vehicle, the two most common are as a replacement for your primary vehicle after an accident or as a means of transportation when you’re traveling.
Understanding how your insurance applies in each of these situations can prepare you for the unexpected and help you to maintain your peace of mind, whether you need a vehicle in the aftermath of an accident or for sightseeing while on vacation.
Transportation Expense Coverage: When You Need a Rental Car After an Accident
Unfortunately, you can’t put your life on hold after a car accident. You still have responsibilities that require a car, like going to work, running errands and keeping scheduled appointments. With a rental car, you are able to get these things done while your car is out of commission. That’s why it’s so important to understand your auto policy’s Transportation Expense (or Rental Reimbursement) Coverage. It helps pay for the cost of a rental car while your vehicle is in the shop due to a covered loss. It is purchased as a dollar amount on a daily basis with a maximum 30 day limit. For example you may purchase $30 of coverage per day up to a maximum $900 total limit.
Do I have Transportation Expense coverage?
Transportation Expense ( or Rental Reimbursement) coverage is an elective coverage, so you must request this coverage when obtaining car insurance. If you have auto insurance, you may have some combination of comprehensive and collision coverage. Collision coverage pays for damage to your vehicle caused by contact with another object, such as another car or structure. Comprehensive coverage pays for non-collision-related damage to your vehicle caused by events such as theft, glass breakage or fire. What your Transportation Expense Coverage will cover depends on whether you have collision coverage, comprehensive coverage or both. If you carry both comprehensive and collision coverage on your vehicle, your Transportation Expense Coverage will pay (at least in part) for a rental vehicle needed after a comprehensive or a collision loss. However, if you only carry comprehensive coverage, your Transportation Expense coverage will kick in for a comprehensive loss (e.g., your car is stolen) but not for a collision loss (e.g., your parked car is hit).
Will my rental reimbursement cover the full cost of a rental car?
How much Transportation Expense Coverage you have purchased influences the type of rental vehicle you can select without incurring out-of-pocket expenses. For example, even if you drive an SUV, that doesn’t mean your rental coverage will pay for a replacement SUV. Depending on your coverage, you may only have enough coverage for a compact car. This could make it difficult to carry on with your normal activities while you wait on your repairs. Even if you can get by with a compact, your auto policy may not cover its full cost. In many auto policies, the base coverage for rental car expenses in the event of a covered loss is $20 a day. However, the average compact rental costs more than $30 a day. This means that you could face out-of-pocket expenses to cover the additional costs when renting a vehicle after an accident. If you’d like to avoid this type of out-of-pocket expense, consider adjusting the amount of per day coverage you have purchased.
Collision Damage Waiver: When You Need a Rental Car on Vacation
The warmth of the sunshine on your skin, the breeze as it blows through your hair, your grandchild’s exuberant laughter. These are the moments you want to remember about your vacation. Then you have those moments of indecision at the rental car counter, when you think to yourself, am I covered by my auto policy when I rent a car on vacation? What does my auto insurance cover? Do I need the coverage offered by the rental counter? Whether the rental car you are driving on vacation is covered by your car insurance policy depends on a couple of questions: What type of car insurance coverages are included on your policy? and Where are you going on vacation?
In most cases, you’ll need comprehensive and collision coverage on at least one vehicle you insure. Any loss would be subject to your deductible. Your auto liability coverage will extend to a rental car with most insurance comapanies. Also, you’ll need to be traveling within the United States, its territories, Puerto Rico or Canada to qualify for rental car coverage through your auto policy.
Should I reject the waiver at the rental counter if I have coverage on my policy?
It may seem to make sense to reject the Collision Damage Waiver (CDW) offered at the rental car counter if you already have coverage. But before you do, you’ll want to be aware of a few additional details.
Even though the damage to the car may be covered, there is one dirty secret that most car rental companies don’t disclose. Most car rental companies will charge you for the amount of time the car is unavailable to rent while it is being repaired. And they don’t charge you the discounted price of $30 a day you rented the car for, they charge you their base price of $60 a day. So say you have an accident and it is going to take 10 days to repair the vehicle, you are going to be charged $60 a day X 10 days = $600. By purchasing their insurance, you will probably not face this expense.
If you purchase their insurance and suffer a comprehensive claim (i.e broken windshield) it should not affect any claims free discount you are receiving on your policy since you are not submitting the claim to your insurance company.
And even though damage to your rental car may be covered under your auto policy, the rental car company may require payment for those damages at the time you return the vehicle. You should consider whether you can afford such a payment, even in the short term, before you reject the waiver. Ask the rental agent for more details as you may have to pay from $1,000 to the full value of the car if it is damaged.
If you don’t have collision coverage on your auto policy, purchasing the collision damage waiver is strongly recommended. You wouldn’t want to risk having to pay for a new rental vehicle if the one you’re driving is destroyed in an accident.
Insurance, as it relates to rental cars, can be complicated. Before renting a car you should always talk to your insurance professional for advise on how exactly your insurance policy will respond if you have an accident in a rental car.