Rental reimbursement insurance is designed to cover the cost of renting a car following an at-fault accident or another type of covered claim. However, it’s important to note that this coverage doesn’t apply in all circumstances. For instance, if your car breaks down due to a mechanical defect or failure, rental reimbursement will not cover the cost of a rental car.

Rental reimbursement insurance works similarly to other claims filed with your insurance company. When you file a claim for rental reimbursement, your insurer will cover the costs up to your coverage limits, which could be a total amount, like $900, or a daily amount, such as $30 a day up to $900 in total. Coverage limits vary, so it’s advisable to review your options with an insurance agent.

Here’s how rental reimbursement works:

  • Purchase an endorsement: To have rental reimbursement coverage, you must add an endorsement to each vehicle on your policy. This coverage applies to claims filed under your comprehensive or collision insurance. Some insurers require both comprehensive and collision coverage on your policy, while others may only require comprehensive. If you only have comprehensive coverage, you won’t have rental reimbursement for accidents that fall under collision.
  • File a claim: You can typically file a claim online, in person, over the phone, or via your insurer’s mobile app.
  • Check your coverage amount: Your rental reimbursement coverage will either cover you up to a specific dollar amount per day or a total amount. It’s important to know your limits before renting a car to determine if you’ll need to pay anything out of pocket.
  • Choose a rental car: Most insurance companies partner with rental car agencies. If you use a partnered company, the insurer will pay the agency directly for your rental car. If you choose a different company, you may need to pay upfront and then seek reimbursement from the insurance company.
  • Confirm details with the rental car agency: Before taking the rental car, clarify the costs, who pays, and the return date. Usually, the insurance company will only approve coverage for the time it takes to repair your car.

Car insurance can cover rental costs after a qualifying claim is filed and approved, but you must have rental reimbursement included in your policy before the accident occurs for the coverage to apply. If you are not at fault, the other driver’s property damage liability insurance will typically cover the cost of your rental car while your vehicle is being repaired.

There are instances when your rental reimbursement coverage may not apply to rental costs. For example, if you have two vehicles on your policy—a car and a truck—and only the car has rental reimbursement coverage, this coverage will not apply if the truck is in an at-fault accident requiring a rental.

Other cases where rental car expenses are not covered include:

  • Vacation Rentals: If you’re traveling and want to rent a car at your destination, you will need to pay the rental fees yourself. Your policy will not cover rental expenses for vacations, whether for business or pleasure.
  • Mechanical Breakdown: Rental reimbursement coverage does not apply if your car is out of commission due to a mechanical issue. It only covers rental car costs if your car is unusable because of a covered loss.
  • Routine Maintenance: Similar to mechanical breakdowns, rental reimbursement does not cover costs when your car is in the shop for standard maintenance.

Rental reimbursement coverage is not standard in many car insurance policies, but several insurance providers offer it as an add-on or supplemental coverage. Insurance professionals recommend that drivers consider adding it, as its cost usually has minimal impact on your overall car insurance premium. This type of coverage can be valuable in reducing your expenses if you’re involved in an accident.

According to the Insurance Information Institute, vehicles typically spend an average of two weeks in the shop after an accident. If you rely on your car for commuting or other daily needs, two weeks of rental car fees can quickly add up when paid out of pocket.

Even if an accident is not your fault and the other driver’s insurance covers rental expenses, sorting out these details can take time. With your own rental reimbursement coverage, you can secure a rental vehicle immediately while resolving the claims process.

Coverage typeMeaning
Rental reimbursement or loss of use coverageOptional coverage that pays for a rental car if you are involved in an accident or experience damage that is covered by your insurer.
Rental car insuranceStandalone policies that cover rental cars if you are involved in an accident while driving a rental. In most cases, your auto insurance policy will extend coverage to your rental car to cover it like your regular vehicle. But you may need extra coverage if your insurer restricts this extension or your policy does not have comprehensive and collision coverage and you need it for your rental car.
Mechanical breakdown coverageAn optional insurance that specifically covers mechanical failures of a car’s internal components such as its transmission or drivetrain. It excludes coverage for routine maintenance, so it’s important to review its specific inclusions before deciding to purchase it. Notably, mechanical breakdown coverage does not include rental car reimbursement benefits.

If you’re left without a vehicle due to an accident caused by someone else, their property damage liability insurance should cover the cost of your rental car. Typically, this coverage will pay for a reasonable replacement, meaning a vehicle similar to your own. Usually, you will receive rental car coverage from the at-fault driver’s policy until your car is repaired or, if the vehicle was totaled, until you are compensated for your loss.

However, since determining fault in an accident can take time, most insurance experts recommend purchasing your own rental reimbursement coverage. This allows you to use your coverage immediately, and then your insurance company can recover the cost of the rental car from the at-fault party or their insurance company once fault is established.

In summary, rental reimbursement coverage is an add-on that can cover a rental car if you experience a covered loss. While it has its limitations and won’t pay for all rental scenarios, most insurance experts recommend it, especially if you only have one vehicle, due to its low cost and the peace of mind it provides.