Can Your Car Insurance Survive a Storm?

With winter coming to a close, it’s time for many parts of the country to start preparing for tropical storms. Such storms can cause massive amounts of damage, not only to your home, but also to your car. Do you have enough auto insurance coverage to withstand that kind of destruction?

The Insurance Information Institute (I.I.I) says that even with comprehensive auto coverage, you may not be fully protected. Comprehensive coverage will pay for losses caused by fire, falling objects, catastrophic storms, vandalism, or animals. It will also protect your car against flood damage.

What you may not be aware of is that even with comprehensive coverage, your auto insurance does not automatically pay for a replacement rental car while your car is being repaired, or while waiting for an authorization from your insurer to purchase a new one.

That’s why it’s important to review your car insurance annually with your insurance agent to determine the extent of your coverage. It’s also a good time to talk about the need for additional coverages such as rental car reimbursement.

Here are a few more tips if your car suffers storm damage:

  • Report damage as soon as possible. If your car is not drivable, your agent or claims center may be able to save you time and money by having the car towed directly to the repair facility instead of to a temporary storage facility. In addition, arrangements may be made immediately to provide you with a replacement rental car, if your policy includes this coverage.
  • Know what your deductible is, as well as any additional charges you will be expected to pay before you authorize any repairs. Be sure your insurance adjuster, claims representative or repair facility appraiser reviews the damage with you and explains the repair process, including the use of original or generic auto parts.
  • Ask about warranties on repairs. You should also find out if your insurer has a repair facility referral program that offers a written limited or lifetime repair warranty backed both by the repairer and insurer for as long as you own your vehicle.
  • Do business only with a reputable insurer. Obtain insurance from companies that have a proven track record of handling auto insurance claims effectively. Get a referral or contact your local Better Business Bureau or State Department of Insurance.

Purchasing a Collision Damage Waiver on Your Rental Car Makes Sense

Although the fees can be considerable, it may be a good idea to purchase a collision damage waiver the next time you rent a car. You may believe you have enough protection from your Personal Auto Policy (PAP); however, that’s just not the case. Your PAP covers the lesser of the actual cash value of the car or the minimum amount to repair or replace it. Your contract with the rental car company may require you to reimburse them for the full value of the vehicle. You would have to make up the difference out-of-pocket. The PAP also does not pay for any increased value of new parts replacing old ones, or any diminution of value, meaning if the market value of the vehicle after repairs is less than that before the accident, you would have to make up the shortfall.

Another area where the waiver can be of great importance is in the settlement process. Your insurance company has the right to inspect and appraise the damaged car before repair or disposal.  However, the rental company is not bound by the terms of your policy, and it may opt to complete the repairs immediately. This would result in your not being covered because you didn’t comply with the terms of the policy.

The rental agreement may require immediate reimbursement for damages. Without the waiver, they could charge your credit card. This can create a significant debt and put you over your credit limit.

Rental agreements often make the renter responsible for any loss in value beyond normal wear and tear, regardless of the cause or who’s at fault. Your PAP doesn’t cover this contingency unless you insure at least one vehicle for both collision and other-than-collision coverage.

You could be responsible for the rental company’s loss of income on the damaged car. Your policy has limited coverage for these charges. The same is true for any administrative or loss-related expenses such as towing, appraisal, claims adjustment, and storage fees you may be charged.

Your PAP is considered excess coverage if:

·   Any coverage is provided by the owner of the auto.

·   There is any other applicable physical damage insurance.

·   There is any other source of recovery applicable to the loss, such as travel policies, credit card coverage, etc.

This can create a controversy over who pays, which can result in litigation. Keep in mind that many states have statutes that may govern this eventuality.

The PAP does not provide physical damage coverage for vehicles that are not private passenger cars, pickups, vans, or trailers. The use of covered vehicles is limited to the U.S., its territories and possessions, Puerto Rico, and Canada. If you rent a trailer, coverage is limited to $500.

The PAP may have limitations on use of vehicles that are not excluded by the rental agreement collision damage waiver. The PAP may also exclude certain drivers or may apply only to designated individuals. The collision damage waiver will probably also only apply to certain individuals, but operators for which no PAP coverage is available may be protected under the rental agreement by adding them as designated drivers.

The PAP will typically include a deductible in the range of $100-$500 or more. In addition, payment for damage to a rental car may result in a significant premium increase because of surcharges or loss of credits. Having a collision damage waiver will protect you from paying increased premiums.