Deductibles and Replacement Car Coverage

Deductibles and Replacement Car (rental car) Coverage are two variables in your insurance policy that may warrant further review.

Typically, a higher deductible lowers your monthly payment, while a lower one raises the monthly cost. Likewise, adding rental coverage will also add to the monthly expense of your insurance.

However, we find that most of our insured customers think they have rental coverage, only to find out after an incident that they do not. That can be a rude awakening during an already-stressful situation.

There are also a variety of levels of rental coverage. Some insurance companies may limit the dollar amount or only pay a percentage of rental expense (and ONLY if a rental is utilized), while others may give a daily allowance whether or not a vehicle is actually utilized. Generally, in each case there are limits to the number of days that will be allowed. However, for a claimant (a person making a claim against another’s insurance policy), there are typically no such limitations other than policy limits.

Nevertheless, policy limits have become an issue over recent years. This year, California raised minimum property damage coverage from $5,000 to $15,000. That means that if you are hit by a minimally covered driver, your claim against their insurance would cap out at $15K, including rental expense. If there was another car involved, your share is pro-rated and may be significantly less. Oftentimes, this issue doesn’t become apparent for days or weeks, which means that the rental expense could end up coming out of your pocket if your own coverage lacks replacement vehicle allowance.

Ideally, we are fully aware of our insurance costs and exposure. Although the reality is that most of us are only aware of the costs, and we assume that our exposure is minimal.

Therefore, in the short term, it would be best to review your policy and remind yourself of those coverages that you selected back when you purchased your policy. The best option is to review your policy with your agent. Many of you know that I am a big fan of agents. Agents are likely the only ones within the company that truly care about you as a client, and a healthy relationship with an insurance agent can save you money and relieve stress.

Agents are the experts that are looking out for your interests and adjusting your exposure to that of your choosing. But what if you have one of those agentless insurance companies? One option would be to have your current policy reviewed by an agent of another company to get a price quote. Most agents will review your policy free of charge and may offer advice to reduce exposure or save money.

In the chaos of customers dealing with insurance claims departments, we often get asked, “What’s the best insurance company?”. The answer is always, “the ones with the best agents.”

A good agent will help hold their company accountable to the provisions of the policy and state laws and regulations in the event of a claims department trying to get away with something at your expense. They can also provide you with the price of changing your deductibles or rental coverages to give peace of mind in the event of an unfortunate incident.

Feel free to give us a call if you need a referral to a good agent!

I hope you find this helpful!

Drive Safely,

~Rob