You’re probably asking, “Hey, Tony, what does car insurance have to do with homesteading?” Well, if you’re like me, then you homestead in order to be more independent. A big part of homesteading is preparation and buffering from the craziness of modern-day society. In my research, I recently came across a new modern-day craziness that could be very expensive if it happens to you. It has to do with car insurance rental car reimbursement coverage.

Is rental car coverage on your car insurance a homesteading topic? I dunno about that, but it is very important. You aren’t going to get this information anywhere else and Homestead.org is always on the lookout for your homestead security, so here we are.

So, What’s the Problem with Your Car Insurance?

Your next car wreck will probably cost you close to $1,000 in additional out-of-pocket costs no matter who you have for your insurance. How? Car rental prices are $80 per day, and the highest insurance reimbursement amount (for every provider except Nationwide) is $30 to $50 per day. Supply disruptions mean that collision repairs are taking 30 days on average. $30 in uncovered expense multiplied by 30 days = $900 out of pocket.  Below are the details.

During the pandemic, rental car agencies either went bankrupt or almost went bankrupt. During that process, they sold off much of their car inventory. Also during Covid, new car production dropped significantly, and it is still not back to normal. New cars still cost a premium, particularly fuel-efficient new cars.

The rental agencies charged a fortune to rent cars during Covid. They learned that it is more profitable to have fewer cars and charge higher rental fees. The average car rental fee has gone up to $70+ per day when you include taxes and fees.

As an added issue, due to supply disruptions, it is possible that any collision repair on your car could take a month or more to get fixed. Shortly after I got my Corolla, I hit a ladder that fell off a truck in front of me. Minor damage, but it took a full 30 days to get the car fixed. The repair shop said they had other cars that took much longer to fix.

Car insurance often includes “Rental Reimbursement.” How much per day does your car rental reimbursement cover? The minimum on many policies is $30. The max for everywhere but Nationwide is $50. You’re on the hook for the extra.

Below are some of the average car rental prices as of July 2021. Since that time, prices have increased 25% across the board. With taxes, add 25% to the HIGHEST price for economy cars.  To check your area, go online and get a car rental quote.

Your insurance company might get discounted prices. Hertz says that if you tell them you are renting the car due to an accident, they give discounted rates even if your car insurance company doesn’t have a discount agreement with them. Others might do the same. I asked my Geico customer service rep if they got a discount. They said, “No.”

I can’t tell you exactly how much a car rental will run you, but if your insurance covers $30 and your rental (with tax) is $60, and it takes 30 days to repair your car… then you will be paying $900 more out of pocket, during a time when you already have expensive problems and you have to pay your insurance deductible. I pay for the maximum allowable per-day rental reimbursement. I used to have Nationwide where the rental reimbursement was $100 per day. Now I have Geiko where the max is only $50. I just did an online quote for my local Enterprise Car rental. The cheapest was $78 per day after fees and taxes.

What happens if the car rental company doesn’t have any “economy” cars left? You’re stuck with the extra costs on top of the extra costs. Car insurance for rental reimbursement is not a blank check.

Summer rates average $5 more per day than “normal” rates. If you live in a tourist destination, then the prices for rental cars may be a lot higher than the numbers above, particularly if there is a shortage of cars.

What Can You Do?

If you get into an accident, consider renting the car from a town within a 100-mile radius (or more) of your city. You might find a much better rate by going to a smaller town in the country… or if you live in a small town, the big city might have more cars and a better rate.

If you own another car that can serve as a backup when your car is in the shop, then you don’t necessarily need rental reimbursement.

Some credit cards include or offer rental car reimbursement. I don’t know the details, but here are some phone numbers if you want to check them out.

Other Alternatives

I don’t have a Costco membership, but I have read that they have deep car rental discounts. It is something to look into. There may be AAA discounts or military discounts. But you need to know what applies to you and how much the rental car will actually cost. So, find out.

There are new online car “sharing” rental companies. Like Airbnb but for cars. In this scenario, you rent a car from another person. The rates can be lower than a rental agency. There are a lot of them; just do a search. I won’t mention any by name in this article because it’s still a changing landscape.

You could also choose to save the difference. The difference between my local rental rate and my insurance coverage for 30 days is about $800. I could just save that money in the bank and know that I have it if I need it.

Hoof it, Bike it, Thumb it, Bum it, Carpool it… etc. You could also just get rides from others or ride a bike. That’s not why we have insurance, but right now, and until car insurance companies offer an appropriate car rental reimbursement rate, we have to deal with it.

Conclusion

This is a big deal if you get into a car accident. By definition, of the two parties in an accident, one of them is at fault. So 50% of accidents are somebody else’s fault. It doesn’t matter how good a driver you are. Once, I was towing an RV that got rear-ended by a car going 70 MPH that didn’t even try to stop. The driver had no insurance and he had warrants, so he got out of the car and ran away. This is an extreme example, but you can’t stop someone from hitting you. So, you need an alternative to the car rental problem.

It is particularly important to me because I drive about 4,000 miles per month. I see accidents all the time. I’ve had a few accidents over the past 30 years. I drive 3-4x more per year than the average driver, so my chances of getting hit or hitting something like a deer are 3-4 times higher than average. I pay extra to my insurance company because I tell them how much I drive; I don’t want to get screwed by not telling them.

This isn’t advice… I’m not an insurance expert. But I do know that if I get into an accident I don’t want to get hit with $1,000 in unexpected rental car fees, and rental car fees are going UP UP UP. There’s a good chance I could rent a car after an accident and never even be told that it was going to be way more than my insurance covers. Then I would have to pay a giant, surprise bill when I returned the car. Would I have the money?

I just went to Enterprise Car Rental in my small East Texas town and said I wanted to rent their cheapest car for 25 days. The total cost was $1947. That is a cost of $78 per day. My max insurance reimbursement is $50 a day. If I had to actually rent this car for that long while my car was getting fixed then it would cost me $700 out of pocket.

I called Geico, my insurance company, and they said they do NOT have any discounts with car rental companies. That means the rates I’m seeing are the rates the rental car would cost. I tried to switch to Nationwide because they have a $100 rental reimbursement rate, but the monthly premium for insurance was $200 more than I’m paying now with Geico! So, that doesn’t work.

I wrote this article because no one is reporting on this. It’s an important issue and it affects everyone who owns a car.

Drive Carefully. It’s a crazy world out there. And happy, happy homesteading!