What Is Car Insurance Rental Reimbursement?

Updated: October 3, 2024

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Rental reimbursement coverage is a valuable optional feature for your car insurance, stepping in to cover rental car costs while your own vehicle undergoes repairs after a covered incident, such as an accident or theft. In car-on-car collisions, the at-fault driver's insurance usually covers the rental expenses.

This coverage is especially beneficial for those who depend heavily on their vehicle for daily activities, particularly in areas with high rental costs or limited public transportation options.

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Key Takeaways

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Rental reimbursement in car insurance reimburses vehicle rentals during repairs after covered losses. Your insurer may reimburse you upon receipt of submission or directly pay the rental company.

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In car-on-car collisions, the at-fault driver's insurance is typically responsible for covering the cost of a rental car for the non-at-fault party, ensuring they remain mobile while their vehicle is being repaired.

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This coverage has specific limits on daily and total rental costs and doesn't extend to expenses like gas, security deposits, or additional insurance from the rental company.

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What Rental Reimbursement in Car Insurance Is

Rental reimbursement coverage is an optional add-on to your car insurance policy. It's not part of a standard policy but can be a lifesaver.

This coverage covers the cost of a rental car while your vehicle is in the shop for repairs after an accident or other covered loss. Think of it as your backup plan, ensuring you're not left without wheels when your car is being repaired after an accident.

However, remember it doesn't cover maintenance costs or vacations, and there are limits on daily and total rental charges.

Rental reimbursement coverage is distinct from rental car insurance. It compensates you for car rental costs following a covered loss, like an accident. On the other hand, rental car insurance is a temporary policy for protection while using a rented vehicle.

Key Takeaways

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What It Covers

  • Cost of renting a car: This includes the daily rental rate of a vehicle similar to your own while it's being repaired for a covered claim.
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What It Doesn’t Cover

  • Gas: You'll need to foot the bill for any fuel used during the rental period.
  • Security deposit: Any deposit required by the rental agency is not covered.
  • Rental insurance: If you opt for additional insurance from the rental company, this cost is not included in your rental reimbursement coverage.
  • Upgrades: Upgrades: The extra cost over your coverage limit is not included if you choose a more expensive or luxury rental vehicle.
  • Extended rental period: Costs for keeping the rental beyond the covered period or after your vehicle is repaired are not included.
  • Additional drivers: Fees for adding extra drivers to the rental agreement are not covered.

How Rental Reimbursement Works

After an accident, once your car insurance claim is approved, you can rent a car. You pay for the rental upfront and then submit the receipts to your insurance company for reimbursement. The duration you can use the rental car depends on your policy's terms, often defined by a daily and total maximum reimbursement amount.

Rental reimbursement coverage typically kicks in for various covered losses under your car insurance policy. Here's a list of common scenarios where you would be eligible for rental reimbursement:

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    Accidents

    This is if your car is damaged in a collision, whether with another vehicle or an object, and requires repair.

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    Theft

    If your vehicle is stolen and you need a temporary replacement while awaiting recovery or replacement.

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    Vandalism

    Coverage applies if your car is vandalized and needs repairs.

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    Natural Disasters

    This is where your car is damaged due to events like floods, earthquakes, or storms.

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    Fire Damage

    If your car is damaged due to a fire, whether it's a vehicle fire or external sources.

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    Animal Damage

    This is if your car is damaged due to an animal, for example, hitting a deer on the road.

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    Falling Objects

    Coverage for damages caused by objects like tree branches, hail, or debris falling on your car.

Rental Reimbursement Coverage Limits

Your rental reimbursement coverage will either have a limit per day or per claim.

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    Daily Limit

    If your policy has a $30 per day limit, the insurer will cover up to $30 each day you need a rental car. This limit helps manage the cost of your policy while still providing a safety net. However, choosing a limit that aligns with rental car prices in your area is important. You may need to pay the difference if the average rental cost is higher than your daily limit.

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    Per Claim Limit

    The total limit is the overall cap on what your insurer will pay for each rental claim. For example, with a $900 total limit, your insurer will cover rental costs up to $900 for the entire duration of your claim. This limit is beneficial for longer repair times, ensuring you have a rental for as long as you need it, up to the policy's maximum amount. It's a balance between getting sufficient coverage and keeping your insurance premiums affordable.

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    Duration Limit

    This limit sets the maximum number of days your insurance will cover a rental car per claim. A common duration limit might be up to 30 days. This is especially helpful if your vehicle repair is extensive and takes several weeks. The duration limit ensures you're not left without a car during lengthy repairs. However, if your car's repair takes longer than the duration limit, you'll need to cover the additional rental days out of pocket.

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    Covered Losses Only

    It only applies when your car is being repaired for a covered loss under your collision or comprehensive insurance. It doesn't cover rentals for car maintenance or non-covered repairs.

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    No Coverage for Additional Fees

    The coverage usually doesn't extend to additional rental car fees, such as gas, insurance purchased through the rental company, or security deposits.

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    Not Available for Comprehensive-Only Policies

    Comprehensive-only insurance policies, often used for vehicles like classic cars, typically do not include rental reimbursement coverage. This type of policy covers damages from non-collision events, such as theft or natural disasters, and does not extend to the costs associated with renting a vehicle.

Companies like GEICO offer the option to transfer your full coverage to the rental car, ensuring you have the same level of protection as your vehicle. Instead of a rental car, some insurers, like Nationwide, offer to cover transportation fees if you prefer public transport or ride-sharing services while your car is being repaired.

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WHO PAYS FOR CAR RENTAL IN A CAR-ON-CAR COLLISION?

In the event of a car-on-car collision, who pays for the rental car typically depends on who is at fault and the insurance policies involved:

  • At-fault driver's insurance: If the other driver is at fault, their liability insurance should cover the cost of your rental car while your vehicle is in for repair. This is part of their property damage liability coverage.
  • Your insurance (If You Have Rental Reimbursement): If you have rental reimbursement coverage as part of your car insurance policy, you can use this regardless of who is at fault. This coverage pays for a rental car while your vehicle is being fixed due to a covered loss.
  • Out-of-pocket (if no coverage is available): If neither party has appropriate insurance coverage, or if there's a delay in determining fault, you might have to pay for the rental car yourself initially. You can seek reimbursement from the at-fault party's insurance later, once fault is established.

It's important to note that insurance procedures can vary by state and by individual insurance policies, so it's always a good idea to check with your insurance provider for specific details related to your coverage.

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DOES RENTAL REIMBURSEMENT HAVE A DEDUCTIBLE?

No, aside from the additional monthly fees you pay for this add-on, you do not have to pay a deductible to use your rental reimbursement coverage. However, suppose you have a full coverage policy that includes collision or comprehensive insurance, and you're using these coverages for repairs. In that case, you will likely need to pay the deductible associated with those specific coverages. The deductible is the amount you pay out of pocket before your insurance coverage kicks in for vehicle repairs or replacement.

Who Should Get Rental Reimbursement

If you need your car daily, live in an area with high rental costs, or drive a large SUV, considering rental reimbursement coverage is a wise move. It ensures you can have a vehicle and avoid hefty rental fees.

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    Residents Outside City Centers

    Having rental reimbursement can be a lifesaver if you live in the suburbs or rural areas where buses and trains are scarce. It keeps your daily life on track when your car is out of commission.

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    Commuters in Urban Areas

    Even in cities with good public transport, having a car for work can be crucial. If you rely on your vehicle for your daily commute, this coverage can be a big help.

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    Busy Families

    For families constantly on the move with school, activities, and errands, losing access to a car can throw everything off balance. Rental reimbursement ensures you have a vehicle when you need it most.

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    Drivers of Large or Unique Vehicles

    If you drive a big or specialized vehicle, renting a similar one can be pricey. This coverage helps manage those higher rental costs, especially if your car needs long-term repairs.

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    People Who Rely Heavily on Their Car

    If your car is essential for your daily tasks and you can't manage without it, consider adding rental reimbursement to your policy. It's a small price for peace of mind and continuous mobility.

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    Owners of Cars With Frequent or Long Repairs

    This coverage can be a real game-changer if your car often needs complex repairs or hard-to-find parts. It keeps you mobile while your car is being fixed.

Rental reimbursement coverage is there for you in case of covered losses, but remember that your collision or comprehensive deductible and your car model play a big role in how much you'll pay for a rental. Rental costs can differ based on where you're located and the type of car you're used to driving.

The good news? With perks like Progressive's Perkshare program, you can get sweet discounts on rentals from their partner companies, making it easier on your wallet. Some rental companies also offer discounts on drivers renting a car because of an accident.

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IS RENTAL REIMBURSEMENT WORTH IT?

Before you decide whether or not to add rental reimbursement coverage to your car insurance policy, weigh the cost against the potential rental car expenses.

Does car insurance typically cover rental cars? Yes, but only if you have rental reimbursement and the repair is due to a covered incident, so you'll want to make sure the cost of the coverage is worth the potential savings. This coverage could be a smart investment if your car is essential for your daily routine, especially in areas with high rental car rates or if you drive a larger vehicle that would be costly to rent. On the other hand, if you have access to reliable public transportation or are comfortable paying for a rental car out of pocket, this coverage might not be necessary.

How to Add Rental Reimbursement Coverage

A quick call to your insurance agent or a few clicks on your insurer's website can get you set up.

  1. 1

    Reach out to your insurance provider

    Get in touch with your insurer, whether it's over the phone, via email, or through their online service. Let them know you want to add rental reimbursement to your car insurance. It's an excellent opportunity to clear up any queries about the coverage.

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    Choose your coverage limits

    Your insurer will offer different limits for your coverage, including a daily and a total limit. Think about the usual rental costs in your area and how long you might need a rental car. Choose limits that fit your needs and budget.

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    Update your policy and confirm changes

    Tell your insurer to update your policy with the new coverage. They'll send you the revised policy documents. Check these to make sure everything is correct. Keep an eye on any premium changes, and keep a copy of your new policy.

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CAN I ADD RENTAL REIMBURSEMENT COVERAGE AFTER AN ACCIDENT?

No, you generally cannot add rental reimbursement coverage to your car insurance policy after an accident has already occurred. Insurance policies are designed to cover unforeseen future risks, not events that have already happened.

Frequently Asked Questions

Rental reimbursement in car insurance helps cover the cost of a rental car while your vehicle is being repaired after a covered accident. Below, you'll find answers to common questions that will help you understand how this coverage works and whether it's right for you.

Is rental reimbursement coverage worth it?

Can I add rental reimbursement coverage after an accident?

How long will rental reimbursement coverage last?

Does rental reimbursement only cover car rentals?

What’s the difference between rental car insurance and rental reimbursement coverage?

About Mark Fitzpatrick

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Mark Fitzpatrick is a Licensed Property and Casualty Insurance Producer and MoneyGeek's Head of Insurance. He has analyzed the insurance market for over five years, conducting original research and creating personalized content for every kind of buyer. He has been quoted in several insurance-related publications, including CNBC, NBC News and Mashable.

Fitzpatrick earned a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his knowledge of economics and insurance to bring transparency around financial topics and help others feel confident in their money moves.

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