Should You Add Rental Car Reimbursement to Your Auto Insurance?

In response to the article on car insurance we published last week, a good friend from college e-mailed me about rental car reimbursement. Here’s what she had to say:

Loved your article on “Everything You Ever Wanted to Know About Car Insurance.”

I was recently in a car accident and one thing I did not have on my insurance was “rental car reimbursement”. If I had only known…Although my car was the least damaged in the three car accident (the two cars behind me…one rear-ended the other and then hit me and pushed my car quite a distance due to the speeds they were traveling. Both the other cars were towed from the scene.)

My car is being repaired which will take 5-7 business days and, with the holidays, possibly even longer. Unfortunately, I didn’t have “rental reimbursement” insurance so my insurance company will not provide me with a rental car. I can pay out of pocket expenses and get a rental car, and then try to recoup the $ from his insurance, however, at this time the driver who caused the accident isn’t show current insurance. I’m already going to have to pay a $500 deductible if he really is uninsured.

I’m counting my blessings as no one was injured…but if only I had known how valuable the “rental car” option is and it’s only $5 a month with our plan. Another life lesson learned.

The good news is my friend wasn’t hurt. But her e-mail got me to thinking–Is rental car reimbursement insurance a good deal? It seems to me there are advantages and disadvantages to getting this extra insurance.

Advantages: The primary advantage is that it gives you some peace of mind that you won’t be unexpectedly hit with a rental car bill that could easily cost several hundred dollars. Particularly during the holidays, having to come up with several hundred dollars can be really tough. And the cost is reasonable at only about $5 per month or so, depending on your car insurance.

Disadvantage: The disadvantage is that in the long run, even $5 a month will probably cost you more than the car rental fees you’re likely to incur. Unless you have a lot of accidents (in which case your insurance costs will go up anyway), you can easily go years without ever needing to rent a car while your car is in the shop. And if you’ve saved up an emergency fund in a high yield CD or savings account, you should be able to withstand the occasional unexpected expense of renting a car.

So what’s your take? Do you have rental car reimbursement insurance and do you think it’s worth the cost?

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