If you’re involved in an accident and your vehicle needs repairs, rental reimbursement coverage through your auto insurance can help pay for public transportation or a rental car. This optional coverage will cost a little more in your premiums, but most people find it is well worth it if they experience a covered event. Learn more about how to protect your finances in case of a covered accident with proper insurance coverage.
What Is Rental Reimbursement?
Rental reimbursement coverage can also be called rental car coverage or transportation expense coverage. Those names are all appropriate because the coverage helps pay for a vehicle similar to yours while yours is in the shop undergoing repairs.
The coverage only applies after a covered event. That means that if your vehicle is in the shop for maintenance or elective upgrades, you won’t have any coverage. But if you are in an accident that your insurance is responsible for paying for, the coverage will apply.
Depending on the language of your car insurance policy, the coverage can provide alternative transportation coverage, such as bus, cab or rideshare expenses or a comparable rental car.
Generally, you select the maximum daily rate for your rental car when choosing your coverage. Going with a lower daily rental car rate can help you save on your premiums, but it also means you might be renting an economy car when you generally drive a luxury sedan.
How Does Rental Reimbursement Work?
When you have rental reimbursement coverage on your insurance, you can use the coverage if you’re in a car accident that is a covered loss. Under some plans, events such as a hail storm that damages a vehicle might be considered a covered loss in which you would have coverage.
Most insurance companies allow you to choose your own rental car company. Some have partner organizations they work with to make the process seamless, and they pay the rental car company directly instead of reimbursing you. Be sure to talk to your claim representative about how that works with your insurance plan.
Coverage often has a daily dollar limit. Make sure you know what that is before securing your rental vehicle to avoid incurring unnecessary expenses.
You’ll then rent the vehicle and either pay out of pocket or your insurance company will cover the cost directly. Depending on your coverage, you might also have a limit on how many days your insurance will cover. Review your policy details to know how that works and what to expect.
Types of Coverages Offered
Rental car reimbursement coverage varies from one insurance company to another and will be based on what you selected when you purchased your policy. Learn some of the options you might have and what they mean in case of a covered event.
Daily Limit and Claim Limit
When you opt for coverage, you’ll need to choose how much coverage you want. Most insurers start at $30 per day, which means that the insurer will cover a rental vehicle that costs up to $30 a day.
You’ll also have a claim limit, which is the maximum dollar amount the plan covers. This might be reflected in how many days the coverage lasts, such as 30 days, or how much money the plan will pay out, such as $900.
While you can rent a car that costs more than your coverage and keep it longer than the covered limit, you’ll be left with paying the remainder of the bill for what is not covered.
Rental Reimbursement Pros and Cons
As you evaluate whether to add this coverage to your policy and pay the premiums for it annually, weigh these pros and cons.
Pros
- The increase in annual premiums is fractional compared to the amount of coverage in case of a covered loss
- You’ll have peace of mind in case of a covered event
- Less headaches of figuring out how to drop off and pick up your vehicle at the repair shop
- One less thing to worry about during what can often be a stressful time
Cons
- Premium increase of about $50 to $100 per year depending on your plan
- Like all insurance, it’s something you pay for and hope to never use
- Will still have limitations as to what vehicle you can rent and for how long
- You could still have to pay some of the daily rental expense if you can’t find a vehicle to rent that fits your policy limits
Tips for Maximizing Rental Reimbursement Coverage Benefits
The best way to get the most from your rental reimbursement coverage is to ensure that you rent a vehicle that falls within the daily maximum limit of what your insurance policy covers.
Depending on your daily maximum limit, you might need to shop around at various rental companies to find a rate within your policy limits. Rental car expenses have soared over the last few years with the rise in inflation and factors brought on by decreased travel during the COVID-19 pandemic. Policyholders with low rental reimbursement expenses will face challenges in finding a rental that is fully covered under their plan.
Additionally, you’ll want to talk to the repair shop to get an idea of how long your vehicle repairs will take. This will help you estimate how long you’ll need the rental to avoid going over your policy limits. You might find a way to work from home or arrange transportation with a friend or family member for the first week or the final week of repair to stay within your policy maximums for the rental vehicle.
Convenience and Peace of Mind After a Covered Loss
Adding rental reimbursement coverage is all about having the convenience of accessible transportation and peace of mind after a covered loss to your vehicle. Talk to your insurance agent about how much it would cost to add the optional coverage to your auto insurance to weigh the cost versus the reward the coverage offers.
Frequently Asked Questions
Is rental car reimbursement coverage mandatory?
No, rental car reimbursement coverage is optional on auto insurance policies.
Is rental reimbursement coverage worth it?
It depends. For many, it helps them budget the expense of rental car reimbursement over time so that they don’t owe a large chunk of change during a stressful time. But you might end up paying more for the coverage between uses than you would to rent a vehicle during a covered loss.
Do you need rental reimbursement coverage if you are not at fault in an accident?
If you are not at fault, having rental reimbursement coverage can still be helpful as it might provide faster coverage than going through the at-fault party’s insurance. That way, you can get your vehicle repaired quickly while using a rental car during the time the at-fault party’s insurance company is investigating the claim.
What happens if I don't have rental car reimbursement coverage?
If you don’t have rental car reimbursement coverage, you’ll have to pay for a rental car out of pocket or work around not having a vehicle while yours is in the shop being repaired.
About Rebekah Brately
Rebekah Brately is an investment writer passionate about helping people learn more about how to grow their wealth. She has more than 12 years of writing experience, focused on technology, travel, family and finance. Her work has been published in Benzinga, Hearst Bay Area, FreightWaves and Dallas Observer publications.