Money & the Law: Limits vary with vehicle rental reimbursement insurance | Business

From the practice of law, I’ve learned that having good insurance is usually better than having a good lawyer (although it’s best to have both since you may need a lawyer to fight your insurance company). In any event, today’s topic involves insurance — specifically, vehicle rental reimbursement insurance.

This insurance will cover (in whole or in part) the cost of using a rental vehicle if your regular vehicle is out of commission by reason of a crash or a tantrum of Mother Nature. If, under your auto policy, you have collision coverage (accidents) and comprehensive coverage (hail, flood, theft, asteroid strikes, etc.), you can add rental reimbursement insurance to your policy. Since this coverage is optional, if you have a spare vehicle , you may decide you don’t need it. Otherwise, it can come in handy and, as such things go, it’s relatively inexpensive.

RAs with all auto insurance products, rental reimbursement insurance comes with limitations and exclusions, and these vary by company . Some companies limit coverage to a certain amount each day and a limit on the total amount the company will pay — say, $30/day with a maximum of $900. Other companies will agree to pay a rate it has negotiated with the rental company for the time “reasonably necessary” to repair your vehicle. Because of parts and labor shortages, coverage duration can be important. If, for example, a repair of your vehicle requires a wiring harness from Ukraine, or a microchip now in short supply, your vehicle may be out of action considerably longer than 30 days.

The duration of coverage will also change if your insurance company decides your vehicle is totaled (or stolen) and makes you a good faith settlement offer. There, you may find your rental reimbursement coverage ends seven days after you receive the offer.

For some insurance companies, what you pay as a premium for rental reimbursement insurance will depend on what type of rental vehicle you elect to receive if you make a claim. For these companies, you can choose a basic econobox or, for a higher premium, something more substantial. You make this choice when you elect the coverage, not when you make a claim.

You should also know that if your vehicle is damaged in an accident caused by another driver, you can make a claim against that driver’s insurance company for the cost of a rental vehicle. This works OK if the other driver admits fault. However, if fault is a matter in dispute (not an infrequent occurrence), you’re likely to be better off making a claim with your own insurance company. Your insurance company can then decide whether it’s worth it to pursue a claim against the other driver’s insurance company.

There is no deductible associated with rental reimbursement insurance. But if the limits of your coverage are less than your cost of renting a substitute vehicle for the time you need it, that extra expense is your obligation and acts like a deductible.

Rental reimbursement insurance doesn’t apply to repairs resulting from a mechanical breakdown. There, you’ll have to pay out of pocket unless a manufacturer’s warranty or an extended service agreement has rental reimbursement as a benefit. (or the repair facility will provide you with a loaner).

Bottom line, before you sign up for rental reimbursement insurance, ask your insurance company how its product operates. As with most things legal, the devil’s in the details.Jim Flynn is with the Colorado Springs firm of Flynn & Wright LLC. You can contact him at [email protected].