Transportation Expense (TE) coverage, often called rental reimbursement is an optional coverage that can be added to your auto insurance policy to help cover the costs associated with renting a car while your vehicle is being repaired due to a covered loss, such as an accident.
Many drivers opt for the minimum rental reimbursement coverage, but is that enough? With the rising cost of vehicle rentals, extended repair times, and other complications, minimum coverage often proves insufficient, leaving policyholders to cover unexpected expenses out of pocket.
Understanding TE Coverage
This coverage provides a fixed daily amount, up to a total limit, that is put toward rental car expenses. For example, if you have $30/$900, these amounts refer to the specific limits:
- $30 per day: The maximum amount your insurance company will reimburse you per day for rental car expenses.
- $900 total: The maximum amount your insurer will pay out for rental car expenses over the entire repair period.
On the surface, opting for low rental reimbursement coverage could seem like enough, but it may not go as far as you think when you need it most – leaving you responsible for the difference.
Rising Rental Car Costs
The price of renting a car has skyrocketed in recent years. In 2023, the average daily cost of renting a car was between $50 and $70, depending on the location, vehicle type, and availability. This is a significant increase compared to previous years, primarily driven by supply chain disruptions, vehicle shortages, and inflation.
If you have minimal TE coverage that offers only $30 per day, but rental prices are closer to $50 or more per day, you would be left covering the difference of $20 per day. This gap can add up quickly. For example, if your repairs take two weeks and the daily rental cost is $60, your insurance would cover only $30 of that each day, leaving you responsible for the remaining $30. Over 14 days, that adds up to $420 out of pocket—a substantial and unexpected expense.
Extended Repair Times
Another factor that can make $30/$900 rental reimbursement coverage insufficient is the time it takes to repair vehicles. Repair times have increased due to various factors, including shortages of auto parts, labor shortages in repair shops, and the growing complexity of modern vehicles. What used to be a simple fix taking a few days might now take weeks—or even a month—depending on the extent of the damage and the availability of parts.
If you have minimum coverage, the total limit might not cover your rental for the entire repair period. For instance, if your car is in the shop for 25 days and you’re renting a car at $50 per day, you would need $1,250 in rental car coverage. However, with minimal TE coverage capped at $900, you’ll be on the hook for the remaining $350, even though you’ve been responsible and maintained insurance coverage.
Limited Vehicle Options
The type of vehicle you need can also impact whether carrying minimum rental reimbursement coverage is sufficient. For instance, if you typically drive a larger vehicle, such as an SUV or minivan, you may need to rent a similar-sized vehicle to accommodate your family or lifestyle needs. Unfortunately, rental prices for larger vehicles tend to be significantly higher than those for compact or economy cars, sometimes reaching $80 to $100 per day.
If your insurance only reimburses $30 per day, but you need an SUV rental that costs $90 per day, you would be responsible for the $60 daily difference. Over the course of just days, this could result in hundreds of dollars of out-of-pocket expenses.
How to Protect Yourself from Paying Out of Pocket
While minimal TE coverage may seem like a cost-effective choice at first, it’s important to weigh the risks and consider upgrading your coverage to ensure you’re fully protected in the event of an accident. Here are some ways to avoid financial surprises:
- Choose Higher Daily and Total Limits: For a small increase in cost, upgrade your TE coverage limits to $50/$1500. By selecting a higher daily limit and total coverage amount, you’ll have greater peace of mind and reduce the likelihood of out-of-pocket expenses.
Pro Tip: As a California Casualty policyholder, we give you the option to update your coverage at any time during your policy period.
- Choose an Economy Rental: If possible, opt for an economy or compact car. These vehicles typically have the lowest daily rates, making it more likely that your $30 daily allowance will cover the cost. Even if you normally drive a larger vehicle, renting a smaller car temporarily can help you avoid additional costs.
- Go Through CalCas: Take advantage of our partnership with Enterprise so you can benefit from:
- Negotiated rates that are below the published daily rate
- Expedited reservations services
- Direct billing from Enterprise to California Casualty for your covered transportation expenses
- Pick up and drop off service in many areas when using our Guaranteed Repair Network of body shops
While choosing minimal Transportation Expense coverage might seem like a smart way to save money, it can lead to unexpected out-of-pocket expenses if rental costs, repair times, or vehicle needs exceed your coverage. With rental prices on the rise and repairs taking longer, a bit more coverage now could help you avoid unwanted surprises later.
This article is furnished by California Casualty, providing auto and home insurance to educators, law enforcement officers, firefighters, and nurses. Get a quote at 1.866.704.8614 or www.calcas.com.
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