Loss-of-use insurance is an optional coverage on many car insurance policies that covers the cost of a rental vehicle for policyholders who have incurred a loss that leaves their car temporarily inoperable.
“Anyone who doesn’t have multiple cars available to drive should purchase loss-of-use insurance because it is much less expensive than renting a car,” says Carole Walker, executive director of the Rocky Mountain Insurance Information Association.
Walker says the cost of loss-of-use car insurance varies depending on the insurance company and the options chosen. However, the extra coverage generally costs less than $50 per year.
Kip Diggs, a spokesperson for State Farm Insurance, says the insurer’s average annual premium for loss-of-use coverage is about $28.
“Anyone who can’t afford the cost of renting a vehicle while theirs is unavailable to them or doesn’t have a spare car to drive should buy loss-of-use coverage,” Diggs says. “Renting a car for days or weeks can be expensive.”
There are many different types of loss-of-use coverage, but most policies “allow a certain amount of coverage per day and a maximum [overall] limit on the cost of a rental car,” says Walker.
Diggs says State Farm generally has no dollar or time limits and pays for a rental car during the entire time the damaged car is being repaired.
Rental fees will also be reimbursed if the car can’t be repaired and you need to rent a car while shopping for a new one. But there usually is a limit on how long rental fees will be covered, Diggs says.
Some consumers may be tempted to upgrade their rental car since the insurance company is paying for it. But because many insurance companies cap the overall amount of money they will pay out, it’s better to exercise restraint, Walker says.
“It’s just transportation while your car is being repaired, so if your policy is limited to a certain level per day or overall, it makes more sense to get the least expensive rental car to make sure you don’t have any additional out-of-pocket expenses,” says Walker.
Walker says drivers have the option of choosing their own rental car company, but she suggests asking the insurance company for a recommendation.
“Most insurance companies have relationships with rental agencies and may be able to get lower rates for their customers,” says Walker.
If the other driver was at fault in the accident, payment for the rental car is generally paid for by the other driver’s insurance company rather than your own loss-of-use car insurance.
“If you are at fault, the coverage will be paid under your loss-of-use endorsement,” Walker says. “If someone else is at fault, the rental car coverage comes from their liability insurance. This way, drivers are covered even if the other driver does not have loss-of-use coverage.”
Walker says drivers should always contact their own insurance company before attempting to contact the other driver’s insurance company.
“You can have the other person’s insurance company pay for your rental vehicle, depending on whether the other driver’s insurance company is accepting fault for the wreck,” says Diggs. “If fault is being disputed, you can use your rental coverage while the final determination is being made.”
Loss-of-use car insurance coverage also does not apply if your car is stolen.
Walker says insurance companies pay for a rental car for drivers who have had a car stolen while the case is under investigation. This coverage comes under the comprehensive auto insurance coverage.
View the original article here
Filed under insurance by on Jan 24th, 2011. Comment. 
Understanding Your Car Insurance Options at the Rental Counter
On vacation, on a business trip or even moving your freshman to college – deciding whether to buy rental car insurance is complicated. As the rental car agent hovers over the contract with a pen, you have to make the decision in a split second!
So, how do you know if the car insurance rates you pay on your current policy will cover your rental car? Although this step-by-step guide can help you avoid a costly mistake, your insurance company may have special rules, so be sure to ask about the coverage available on your own policy. From determining if auto insurance companies will provide coverage for your rental to insurance for traveling abroad, use these five simple steps to avoid a costly mistake:
Most auto insurance companies will extend the coverage on your personal auto policy to a rental car. The important fact is whether you have bought Comprehensive and Collision coverage on your own car. That’s the coverage that pays for damages like scratches, dents and thefts. If you have this coverage on your own policy, it will transfer to a rental. Call your auto insurance company to check – but before you do, keep reading.
Many credit cards will pay for damage to a rental car when you pay with that card, but the coverage will be secondary to your own policy if you have one. Your card also may pay for towing – but will never pay for damage or injury that you cause to another car or driver. That’s covered by liability or personal injury protection – which is why having your own policy is so important.
Many employers have corporate coverage for employees who rent cars, so don’t buy the extra coverage unless you’ve checked with your boss or the fleet department first. When you travel for pleasure, your rental car is considered a temporary substitute for the car you’ve left at home – and that’s why the policy you have with your own auto insurance company may provide coverage.
In the United States, insurance laws are different in every state. Policies in some states like Massachusetts may only cover travel within the state. But, in most states, you’re covered as long as you drive in the U.S. However, many policies may limit coverage if you travel to Canada and few will cover travel to Mexico. If you’re traveling abroad, most travel guides recommend buying the coverage with the rental car, because it’s too complicated to deal with insurance in another country.
Or your best friend, boyfriend or teenage daughter. Rental car companies are picky about who drives their car and any coverage you have on your policy from your own auto insurance company (or the rental car policy) may not cover another driver – unless they are listed on the rental contract.
Get an auto insurance quote online now at insurance.com to find some of the best car insurance rates and discounts available, or call one of our friendly licensed agents toll-free.
Looking for different information? Have questions or comments? Please let us know.
Originally posted September 17, 2004.
Filed under insurance by on Jan 18th, 2011. Comment.
my car is at a auto mechanic’s shop and was vandalized…?
my 30000 dollar car is a convertable was getting some simple maintenance and over night an 18 inch “t” cut was made int the top. manager of the shop is trying to squirm his responsibility off of himself. i have insurance but feel it should not be anywhere involved in this situation? help!!!! what are my rights and options.. rental car paid by him?
File a claim with your insurance, and, if they believe there is liability with the shop, they will take the appropriate action.
Filed under auto insurance price quote by on May 31st, 2010. Comment.