1. Forms
2. PP
3. PP-03-05

Form PP 03 05 - Rental Reimbursement Coverage

1. What the form is

The PP 03 05, titled "Rental Reimbursement Coverage," is an endorsement to the standard Personal Auto Policy (PP 00 01). Its primary purpose is to provide coverage for expenses an insured incurs to rent a substitute auto when their covered auto is out of service due to a covered comprehensive or collision loss. This means if an insured's car is damaged in an accident or by an event like theft or vandalism, and the loss is covered under their comprehensive or collision coverage, this endorsement helps pay for a rental car. It can also cover other forms of transportation, like bus fare or cab rides, if a rental car isn't used. This coverage is typically optional and requires an additional premium.

2. Classes of business it applies to

This endorsement applies specifically to personal auto insurance policies. It is designed for individuals who own or lease private passenger autos, pickups, or vans and want to ensure they have transportation if their vehicle is unusable due to a covered loss. It is not intended for commercial auto policies or for situations where a vehicle is undergoing routine maintenance or is rented for vacation purposes. For example, if a policyholder's car is stolen (a comprehensive loss) or damaged in a collision, this coverage would help them rent a car while their vehicle is being repaired or replaced. Another example would be if a family relies on a single vehicle for daily commuting and errands; this coverage would be highly beneficial if that vehicle were temporarily out of commission due to a covered accident.

3. Special considerations

There are several important points to consider regarding the PP 03 05 endorsement:

• Covered Loss Requirement: Rental reimbursement coverage only applies if the loss that renders the vehicle inoperable is covered under the policy's Comprehensive or Collision coverages. If the insured doesn't carry these coverages, or if the cause of damage isn't a covered peril (e.g., mechanical breakdown), this endorsement won't provide benefits.
• Limits of Coverage: The coverage is typically subject to a daily limit and a maximum number of days or a total maximum amount per claim. For instance, a policy might cover $30 per day for a maximum of 30 days, or up to a total of $900. If the rental costs exceed these limits, the insured is responsible for the difference.
• Waiting Period (for theft): In the event of a total theft of the covered auto, there's often a waiting period, such as 48 hours, before transportation expenses are paid.
• Duration of Coverage: The rental period is limited to the time reasonably required to repair or replace the vehicle. If the vehicle is determined to be a total loss, the rental period typically ends a set number of days (e.g., seven days) after the insurer has made a settlement offer.
• Exclusions: Costs like gasoline, mileage, security deposits for the rental car, or any additional insurance purchased from the rental company are generally not covered by this endorsement.
• Direct Billing: Some insurers have arrangements with preferred rental companies that allow for direct billing, meaning the rental company bills the insurer directly, minimizing out-of-pocket expenses for the insured (though a security deposit may still be required by the rental agency). If the insured uses a non-preferred rental company, they may need to pay upfront and seek reimbursement.
• No Deductible: Typically, Rental Reimbursement Coverage itself does not have a deductible. However, the underlying Comprehensive or Collision claim that triggers this coverage will be subject to its respective deductible.

4. Key information for agents and underwriters

For agents and underwriters, understanding the nuances of PP 03 05 is crucial for proper risk assessment and advising clients:

• Pricing: The premium for this endorsement is generally modest but varies based on the limits selected (daily amount and maximum duration/total). Higher limits will naturally result in a higher premium.
• Risk Assessment: While the direct risk associated with this endorsement is the cost of rental, its usage is tied to the frequency and severity of comprehensive and collision claims. Therefore, underwriting considerations for the underlying physical damage coverages are paramount. Factors like driving records, vehicle type, and geographic location, which influence the likelihood of physical damage claims, indirectly impact the potential exposure under PP 03 05.
• Coverage Gaps: Agents should clearly explain the limitations, especially the daily and total claim limits, and what is not covered (e.g., fuel, additional rental insurance). This helps manage client expectations. It's also important to ensure clients understand that this coverage is contingent on having Comprehensive and Collision coverage.
• Underwriting Guidelines: Insurers will typically require that the insured vehicle carries both Comprehensive and Collision coverage before allowing the addition of Rental Reimbursement. The availability and specific limits offered may also vary by state or insurer.
• Client Needs Assessment: Agents should discuss with clients their transportation needs. For individuals or families with only one vehicle or those who would face significant hardship without a vehicle, this coverage offers substantial value. Conversely, someone with access to alternative transportation might deem it less critical.
• Relationship to PP 00 01: The PP 03 05 is an endorsement that modifies the base Personal Auto Policy (PP 00 01). All terms and conditions of the PP 00 01 apply unless specifically modified by this endorsement.