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Your car insurance policy will not cover the cost of a rental vehicle if your car breaks down. But if you’re involved in an accident and need to send your car to the garage for repair, rental reimbursement coverage can help pay for the cost of a rental.
Here’s what you need to know about rental reimbursement coverage:
What is Rent Reimbursement Coverage?
Rental Reimbursement Coverage is optional coverage you can add to your auto insurance policy to help cover the cost of a rental car while yours is being repaired following a covered loss. It won’t reimburse you if you need a rental while your car is in the garage for routine maintenance, mechanical issues, or other reasons not covered by car insurance.
Car rental coverage isn’t included in your policy, and you’ll usually need to have collision or all-risk coverage to add it. However, the cost to add rental car coverage is minimal – so low that if you need to use it even once, you’ll be glad you have it.
Check: Rental car insurance: do you need it?
Do you need rent reimbursement coverage?
If you can easily afford to pay for a rental car for a month or more, you don’t need rental reimbursement coverage.
That said, it can be very nice to have. You never know how expensive rental cars can be when you need them, and some insurers have agreements with certain rental agencies to help you get a better price on a loan. That lower price could be a big deal if your car is in the store for weeks.
Additionally, it may be more convenient to have your own coverage, whether or not you are at-fault in an accident. The other driver may be uninsured or underinsured, so you can’t assume that someone who hits you will be able to afford your rental costs.
Even though the other driver’s insurance will pay for your rental car, it may be easier to rely on your own rental coverage. All you have to do is tell your insurer, and they will deal with the other driver’s carrier and work to get you reimbursed.
How does car rental reimbursement work?
Most insurers will cover a rental for up to 30 days. When you file a claim, your insurer extends coverage up to the reimbursement limit for your rental car.
Your insurer may also cover a percentage of your car rental costs up to an overall limit. You’ll share the cost, but you won’t be subject to a daily limit.
If your car is destroyed in an accident, you will have 30 days – or whatever the maximum number of days your insurer sets for its rental reimbursement coverage – to replace your car. Once you have accepted the loss settlement from the insurance company and received payment for your claim, it is your responsibility to take that money and replace your car.
You can choose to spend a portion of the claim payment to keep your rental longer while you shop. But once you have recovered, your insurer is relieved of the cost of your rental.
Learn more: What is a no-fault accident?
How to Purchase and Use Rental Car Reimbursement Coverage
This varies depending on your insurer, but in general, here’s how to purchase and use rental car reimbursement coverage:
- Purchase a rental coverage endorsement for your vehicle. Check your car insurance declarations page to see if you have this coverage. If not, contact your insurer and ask them to add it to your policy. Pay the additional premium for your coverage to come into effect.
- File a complaint. If you need to file a claim for a covered peril, your rental car reimbursement coverage should automatically kick in.
- Choose a rental car within the coverage limits. Ask your insurance agent, claims adjuster, or customer service agent if your insurance company has a contract with a rental agency. If so, check out those companies first. Your insurer may be able to pay them directly for your rental and save you on out-of-pocket expenses. If not, shop around for the best car rental rates in your area.
- Work with the rental agency to confirm coverage. When you book your rental car, be sure to let the agent know that you are renting it due to your insurance claim. Ask what the cost of the rental car will be and if the company will bill your insurer directly. If there is a discrepancy between what your insurer and the rental company are telling you, clarify it before you sign the rental documents and leave.
When will insurance pay for a rental car?
The insurance will pay for a rental car when your insured vehicle suffers a covered loss. You will need to have comprehensive auto insurance, or at least collision coverage or comprehensive coverage.
For example, if you have collision coverage, your rental car reimbursement endorsement will pay you to rent a car after an accident so you can get your car repaired. If you have comprehensive coverage and your car is stolen, you can also use your rental car coverage.
It probably goes without saying, but insurance won’t pay you to rent a car on vacation. It also won’t reimburse you for a rental car while your car is in the garage for mechanical issues or routine maintenance. These are not risks covered by auto insurance. So if you get new brakes or have an oil leak fixed, you’ll have to pay out of pocket for a rental car.
Will auto insurance pay for towing my car if it breaks down?
Your auto insurance may pay for a tow truck if your car breaks down. Check your policy to see if you have roadside assistance coverage. You can also have this coverage if you are a member of the American Automobile Association (AAA) or have a credit card with this coverage.
What should I do if I have an accident with a rental car?
If you have an accident while driving a rental car, you must follow the same steps as for any other accident: report it to the police, exchange information with the other driver and inform your insurance company.
You will also want to report the incident to the rental car company and arrange for a replacement rental car.
How much does car rental coverage cost?
Car rental coverage is inexpensive compared to liability, collision, and comprehensive insurance. It may cost you less than $20 for six months of car rental coverage, depending on your insurance company.
That’s because your insurer knows they won’t have to pay much if you need to use your rental car reimbursement. And since you can only use it after a covered accident or loss, you probably won’t need to use it very often.
Disclaimer: All insurance related services are provided by Young Alfred.