Dave Ramsey Said You Don’t Need This Auto Insurance Coverage. Here’s Why He’s Wrong

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Dave Ramsey doesn’t believe drivers need rental car insurance. Keep reading to learn why this coverage could be a good idea. 

Having the right auto insurance coverage is very important for motorists. Without sufficient protection in place, a collision or other incident such as a stolen car could drain a driver’s checking account and damage their finances irrevocably.

There are many different types of auto insurance, though, and it can sometimes be hard to figure out which ones are necessary. Finance guru Dave Ramsey has some advice about this, including a suggestion that drivers skip a particular type of insurance coverage.

Unfortunately, Ramsey’s advice about this is wrong, and drivers who follow it could end up with regrets.

Here’s the type of insurance Ramsey says to skip

Ramsey said that most drivers can avoid adding rental car reimbursement to their auto insurance policy.

Rental car reimbursement is different from rental car insurance. It pays for the cost of a rental car after a covered accident so motorists have something to drive while insurance is evaluating the car’s condition to cut a check and while repairs are being made.

“The truth is, you probably don’t need this coverage — especially if you have a fully funded emergency fund in place, access to a second vehicle, or nice friends who can shuttle you around for a few days,” Ramsey said.

Here’s why most drivers shouldn’t listen

This advice from Ramsey is pretty short sighted. See, rental car reimbursement typically adds about $4 or less per month to the cost of auto insurance premiums — so around $48 a year.

Meanwhile, the daily cost of renting a full-size car typically comes in at around $40.43 per day. So, basically, a driver who needs a rental car for just two days after an accident would have been better off having rental car insurance coverage.

The reality is, sometimes it can take weeks for everything to be resolved after an accident — especially if the damages are serious, there is a dispute about which insurance company should pay for losses, or if there’s conflict with an insurer over how much repairs will be or how much the insurer could pay out to replace a totaled car.

In fact, when I was involved in an auto accident years ago, I ended up without a car or an insurance check for close to a month. And had I not had rental car insurance, I would have been out hundreds of dollars.

Most people don’t just have an extra vehicle they can drive around while their car is in the shop — and most people have a car-dependent lifestyle that requires them to be able to drive places. While a motorist theoretically could use an emergency fund to pay for a rental car, it just doesn’t make sense to drain an emergency fund when it costs so little to purchase insurance coverage to make sure you don’t find yourself in that position to begin with.

Anyone who would need a car if theirs was stolen or if they were in a collision should have rental car insurance coverage on their policy. Listening to Ramsey on this issue is a decision that could lead to serious regrets.

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