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Towing & Labor, Rental Reimbursement, what do I need?

If you need auto insurance, then chances are good that you own a car.  And if you own or lease your vehicle, do you recall what the process was like when you purchased or leased this vehicle?  Especially if it was a new car?

If so, you likely learned a great deal about the specific type of car you eventually purchased.  Type of engine, stereo system, safety features, rear legroom, trunk space, packages available… the list goes on.

It can be downright overwhelming!

But if you persevered through this process, hopefully your reward was the vehicle that was perfect for you!

Nothing less that left you feeling like you wanted more, and nothing more that had you feeling like you paid for a feature you’re never likely to use.

How does this relate to your auto insurance?

Well in short, quite a bit.

You see, when you’re purchasing your auto insurance policy, you have all types of options that you can include.  Some are mandatory, such as liability coverage.  Just as you’d never expect to purchase a car without tires, you shouldn’t expect to purchase auto insurance without liability coverage.

But other coverages are completely optional.  It’s up to you, and your insurance advisor, to determine what’s important to you, and what you’re comfortable rejecting.

We’ll start with some of the most popular additional coverages.  Keep in mind, not all coverage options are offered by every insurance company.  This is why it’s extremely important that you have a knowledgeable, experienced insurance advisor that can help you find an insurance company that’s perfect for you!

Towing & Labor

This coverage is typically offered at specified limits, such as $50, $75, $100 or $150.

What is it?

Imagine your car breaks down on the road and you need a jump-start, tire change or your vehicle towed to your service center.  If you’ve added the Towing & Labor option to your auto policy, a portion of the costs you incur (possibly the entire cost) could be covered by your policy.

If you're a member of an auto club such as AAA, you probably don't need this coverage.  However, it’s often fairly inexpensive, sometimes as little as $10 per year.

Transportation Expense

This is a fancy way of saying your policy provides coverage for a rental car if your vehicle is involved in an accident.

Let’s say you rear-end another vehicle.  No injuries, but there’s enough damage to your vehicle that it’s going to be in the body shop for 3 days to be repaired.  If you elected to include this coverage, your policy will pay for a rental car while your vehicle is being repaired.

Note. If the accident was not your fault, the cost of the rental car should be picked up by the other person's insurance company.

This coverage is usually expressed in terms of a daily limit that your insurance policy will provide (such as $20, $30 or $40 per day) as well as a maximum amount that’s available for the claim (such as $600, $900 or $1,200).

Similar to Towing & Labor, this coverage is very affordable.  Of course it depends on the limit of coverage you select, but the annual premium could be less than $10.

Replacement Cost

This coverage is a good example of an option that’s only available with certain insurance companies.

Why?

Most insurance policies provide coverage for your vehicle based on its Actual Cash Value (ACV), which means what the vehicle is worth at the time it’s totaled or stolen.

If you have a 5 year-old vehicle with 75,000 miles that’s totaled in an accident, your insurance company will replace it with a similar 5 year-old vehicle that also has 75,000 miles (roughly).

However, depending on your insurance company, you may have the option to purchase Replacement Cost Coverage which would reimburse you the cost of a new vehicle, instead of the vehicle’s ACV.

Generally, if this coverage is an option, it has certain restrictions, such as:

  • The coverage only applies for a specified number of years (the insurance company doesn’t want to replace your 10 year-old vehicle with a brand new car)
  • Certain types of claims may be excluded (for example, theft or fire)
  • Coverage can only be added if you purchased the vehicle when it was new (you can’t add Replacement Cost Coverage to a used vehicle you just bought)

The premium for this coverage varies widely from one insurance company to another, but could run you as much as $100 per year, or more.

Loan-Lease or GAP

You’ve probably heard about how much your new car depreciates as soon as you drive it off the lot, right?

Well unfortunately, just because your brand new car is worth substantially less simply because you now own it, your loan is still the exact same amount.

So what happens if you wreck your brand new car, and it’s determined that the vehicle is totaled?

You could be in a tough spot.

Your insurance company owes you for what the vehicle was worth at the time of the accident.  But your loan amount could far exceed the value of your vehicle.

So what can you do?

This is where Loan Lease Coverage, sometimes referred to as GAP Coverage, can be critically important.

If you include this coverage on your policy and your vehicle is totaled or stolen, your insurance company will pay the balance of your loan if it’s greater than the ACV of your vehicle.

This coverage is usually only available on certain types of vehicles, such as vehicles where you’re the original owner.

Other options…

While these are the most popular coverage options for consumers, there are numerous others you can discuss with your insurance advisor.  For example:

  • Electronic Equipment
  • Electronic Media
  • Customized Equipment installed in or on your vehicle
  • Trip Interruption
  • Deductible Waiver
  • Death Benefits

With so many options available, you could likely double your auto premium if you included every coverage.  If you’re like most consumers, you’ll end up somewhere in the middle… a happy balance of the protection you desire, at a premium that’s affordable for you.

Which is why it’s critically important that you’re aware of your options, as well as the respective cost of each.  Ultimately, purchasing your auto policy is just like purchasing your new car:  it needs to be perfect for you!

If you’d like to learn more, contact one of our Licensed Advisors or complete the form on this page.  We’re here to help.

To continue learning about your insurance protection, return to our Resource Center.

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