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How Rental Car Reimbursement Insurance Works

Published August 5, 2022
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Do you need Rental Car Reimbursement Insurance?

More and more drivers are considering adding rental car reimbursement to their auto insurance. Being without a car, especially for an extended period, is simply not an option for most people. That’s why insurers offer this type of coverage. It is becoming more popular as it pays for a rental car when your car is being repaired due to an accident that is your fault. 

According to a new report, the average length of renting a car as your vehicle is being repaired increased by 4.5 days (for a total average of 17.7 days) in the second quarter of 2022. So, with staffing shortages and delays in getting parts, the time for accident-related car repairs can now average three weeks. Add to this the low availability and high cost of rental vehicles and it’s easy to see why there’s been an increased demand for rental car reimbursement insurance.

What this article covers:

  • Defines rental car reimbursement insurance and coverage details.
  • Reviews the cost and how this type of insurance works.
  • Discusses if you need it and provides scenarios to help you decide.
  • Provides some steps to get started and purchase this coverage.

What you should know:

  • The average time for collision-related repairs to a vehicle has increased.
  • This type of coverage can be relatively inexpensive.
  • Rental car reimbursement coverage has no deductible.
  • Knowing your situation and being prepared if you rent a car will save you money.

What is Rental Car Reimbursement Insurance?

Rental car reimbursement insurance covers the cost of a rental car for people whose cars are being repaired due to an accident. Under most insurers, this coverage may only be added when you already have collision and comprehensive coverage on your auto insurance policy. Rental car reimbursement insurance also covers transportation expenses, including the cost of having to use public transportation, taxis, and Uber or Lyft rides while your car is in the shop. 

Rental car reimbursement insurance shouldn’t be confused with rental car insurance, which is insurance that applies to rental cars, for example, while someone is on vacation. No insurance companies include rental car reimbursement insurance on standard auto insurance policies. It’s something that must be added to a full coverage auto policy that already includes comprehension and collision. If you did not add this type of coverage, your car rental company will offer you rental car insurance at the time of your rental, which covers damages if you’re involved in an accident.

How much does this insurance cost?

Rental car reimbursement insurance varies from insurer to insurer but can cost as little as $2 per month. For people who’ll need to rent a luxury car or a large SUV while their car is in the shop, adding more coverage will ensure it will cover the extra expense of renting something other than a budget or economy class car. 

How does Rental Car Reimbursement Insurance work?

Rental car reimbursement insurance only kicks in when your insurance company is paying for the repairs to your car. In other words, when the accident is your fault. On the other hand, if the other driver is at fault, their insurance would kick in to cover your rental car. 

You will have to decide if you want to rent the car yourself or pay for it upfront and then get reimbursed by your insurance company. Or you can let your car insurance company manage the rental agreement. 

Coverage rates are based on daily limits and total claim limits. The lower the coverage limit, the lower the premium.

According to Forbes, limits typically include a daily (e.g. $30 per day) amount with a maximum claim limit (e.g. $900 maximum) that may apply. 

What if “who’s at fault” is contested?

If both drivers say the other driver is at fault, the claims adjuster will need time to determine the cause of the accident. If it’s not obvious which driver is at fault, you’ll need to pay upfront for your rental car replacement. If it’s determined that the other driver is at fault, then you’ll be reimbursed eventually, but this could take time.

How do I know if I need this type of insurance?

Everyone’s situation and needs are unique when it comes to buying insurance. When considering coverages outside of your standard auto policy, you may want to consult your agent or insurance company. But before considering rental reimbursement coverage, take a look at how a rental car fits into your life situation and driving needs.

Here are several factors to consider when deciding if rental car reimbursement insurance is right for you.

Commute or Work from Home 

If you work from home and can get away with not renting a car for a few weeks, rental car reimbursement insurance may not be necessary for you to get by. However, if you commute daily to an office, don’t have reliable public transportation where you live, and belong to a one-car household where there’s no other car to borrow, it could definitely come in handy. 

Can’t Afford a Rental Car 

Sometimes renting a vehicle is necessary and can be an unexpected expense. If renting a car for several weeks would be a large financial burden, or if paying for the expense upfront would be difficult, consider adding a basic rental car reimbursement insurance add-on to your policy. 

You Drive a Luxury Car or SUV

Being prepared for emergency situations may be a good idea. For example, if you work in an industry where you need to drive a luxury car for work, or you have a large family and need to transport children to and from school and after-school events, luxury cars and SUVs are much more expensive to rent. Rental car reimbursement insurance will help ensure you’re reimbursed for your expensive rental car.

You Live in a Rural Area

If you live in a rural area where there aren’t a lot of rental car options, chances are you’re going to pay a lot more for that rental car when you need it. Also, if you live in an area where accidents involving deer and other wildlife are common, the cost of a rental car would be covered for an accident caused by hitting wildlife so long as you have comprehensive and collision coverage. 

Your Driving History and Rental Rates 

It might be worth considering your driving record when contemplating if you need rental car reimbursement insurance. Keep in mind that it only applies to accidents that are your fault. Also, for a minor fender bender, your car won’t be in the shop for as long as it would be for a major collision. Although accidents can occur at any time, drivers who are at fault in a major accident are the ones who will reap the most benefits from rental car reimbursement insurance. 

What steps should I follow to purchase rental car reimbursement coverage?

The first step to take when considering adding rental car reimbursement insurance is to contact your auto insurance company and find out how much coverage will cost. Then, check how much it would cost to rent a comparable vehicle in your area on a last-minute basis. Compare the cost of the added coverage to the cost of the car rental to determine at what point it makes financial sense for you to add this coverage. 

If you have minimum car insurance coverages and do not currently have comprehension and collision insurance on your vehicle, remember to add the cost of this additional coverage. It will be required by your insurer in order to add rental car reimbursement insurance. Remember, there’s no deductible for rental car reimbursement insurance. 

It’s your decision.

With the increasing costs of rental cars and the supply-chain delays and disruptions that are still present in the post-pandemic economy, purchasing rental car reimbursement insurance may make sense for a lot of commuters and families. You may want to review your own daily routine and vehicle needs to see if this coverage is right for you. 

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