When your car is in the shop after an accident, life doesn't pause. You still need to get to work, take kids to school, and handle daily responsibilities. Rental reimbursement coverage pays for a rental car while your vehicle is being repaired. But is this coverage worth adding to your policy, or are you better off self-insuring this risk? Let's explore what this coverage offers and help you decide if it makes sense for your situation.
What Rental Reimbursement Covers
Rental reimbursement coverage, sometimes called rental car coverage or transportation expense coverage, pays for a rental vehicle when your car is being repaired due to a covered claim under your collision or comprehensive coverage.
Covered Situations
This coverage applies when your vehicle is undrivable or being repaired due to:
- Collision damage: Accident repairs covered under your collision coverage
- Comprehensive claims: Repairs for theft recovery, vandalism, weather damage, or other comprehensive claims
- Total loss: Some policies provide rental coverage for a limited time while you shop for a replacement vehicle after yours is totaled
The coverage begins when you pick up the rental car and continues until your vehicle is repaired and ready to drive, or until you reach your coverage limits.
What It Doesn't Cover
Understanding the limitations helps prevent surprises when you need to use this coverage.
Rental reimbursement typically doesn't cover:
- Mechanical breakdowns: If your car needs repairs due to mechanical failure rather than accident damage
- Routine maintenance: Oil changes, tire rotations, or scheduled service
- Recall repairs: Work performed due to manufacturer recalls
- Pre-existing damage: Repairs for damage that existed before the covered incident
Some policies exclude coverage if you have access to another vehicle in your household. Check your specific policy language for these types of restrictions.
Understanding Coverage Limits
Rental reimbursement coverage comes with two types of limits that work together to cap your benefit.
Daily Limits
Your policy specifies a maximum daily reimbursement amount, typically ranging from $30 to $100 per day. Common options include:
- $30 per day
- $40 per day
- $50 per day
- $75 per day
- $100 per day
This daily limit determines which rental car class you can afford. A $30 daily limit typically covers a basic economy car, while a $75 or $100 limit allows you to rent something closer to a mid-size or full-size vehicle.
If you rent a car that costs more than your daily limit, you pay the difference out of pocket. For example, with a $40 daily limit, if you rent a car for $55 per day, you'll pay the extra $15 daily.
Maximum Total Limits
Policies also specify a maximum total amount they'll pay per claim, typically expressed as a total dollar amount. Common limits include:
- $900 total ($30/day for up to 30 days)
- $1,200 total ($40/day for up to 30 days)
- $1,500 total ($50/day for up to 30 days)
These limits usually work out to 30 days of coverage at your selected daily rate, though some insurers offer different combinations. Once you reach your maximum total, coverage stops even if your car still isn't repaired.
How Much Rental Reimbursement Costs
Rental reimbursement coverage is relatively inexpensive compared to other auto insurance coverages. The cost varies based on your chosen limits, location, and insurance company.
Typical annual costs for rental reimbursement include:
- $30/day limit: $15-$30 per year
- $40/day limit: $20-$40 per year
- $50/day limit: $30-$50 per year
- $75/day limit: $40-$60 per year
For most drivers, adding this coverage costs less than renting a car for two or three days. If you use it even once during your time with that insurance company, it typically pays for itself.
When Rental Reimbursement Makes Sense
This coverage isn't essential for everyone, but certain situations make it particularly valuable.
You Rely on Your Vehicle Daily
If you depend on your car for work, school, or other daily obligations, being without transportation creates immediate problems. Rental reimbursement ensures you maintain mobility without unexpected expense.
You Have One Vehicle in Your Household
Single-vehicle households face greater disruption when that car is unusable. Without a backup vehicle, rental coverage becomes more important.
You Can't Afford Unexpected Rental Costs
Rental cars typically cost $40-$80 per day. Over a week or two of repairs, this adds up quickly. If paying $300-$800 out of pocket would strain your budget, the modest cost of rental coverage provides valuable protection.
You Have a Long Repair Period Risk
Some vehicles, particularly newer models with advanced technology or rare vehicles with limited parts availability, take longer to repair. If your vehicle falls into this category, rental coverage protects against extended repair times.
When You Might Skip This Coverage
Rental reimbursement isn't necessary in several situations.
You have multiple vehicles: If another car sits in your garage that you can drive while yours is repaired, you don't need rental coverage.
You have alternative transportation: If you can take public transit, carpool, or easily work from home, the need for a rental car diminishes.
You have substantial savings: If you could easily afford to rent a car for a few weeks without financial stress, you might prefer to self-insure this risk and save the premium.
You rarely use your car: If you drive infrequently and could manage without your vehicle for weeks, this coverage might not be worth the cost.
Alternative Options to Consider
Rental reimbursement through your auto insurance isn't your only option for securing transportation after an accident.
At-Fault Driver's Insurance
If another driver caused the accident, their liability insurance should pay for your rental car. You wouldn't use your rental reimbursement coverage in this case. However, the other driver's insurance only pays if they were clearly at fault and accept responsibility, which can take time to determine.
Rental reimbursement on your own policy provides immediate access to a rental car without waiting for the other insurance company to accept liability. You can then seek reimbursement from the at-fault driver's insurer later.
Credit Card Rental Benefits
Some credit cards offer rental car coverage when you use the card to pay for the rental. However, this coverage typically only applies to damage to the rental car itself, not to providing a rental after your car is damaged. It's not a substitute for rental reimbursement coverage.
Pay Out of Pocket
You can always rent a car and pay for it yourself. This approach works if you have emergency savings and don't mind the upfront cost. You might recover these expenses later if another driver was at fault, but you'll need to advance the money initially.
Mechanical Breakdown Insurance or Extended Warranty
Some mechanical breakdown insurance policies or extended warranties include rental car coverage when your vehicle needs covered repairs. If you carry these products, check whether they include rental benefits that might reduce your need for rental reimbursement on your auto policy.
Maximizing Your Rental Coverage
If you carry rental reimbursement coverage, understanding how to use it effectively ensures you get full value from it.
Rent Within Your Limits
Choose a rental car that fits within your daily limit. Renting a vehicle that costs more means paying the difference yourself, which reduces the coverage's value.
Start and Stop Promptly
Pick up your rental car as soon as your vehicle enters the shop, and return it promptly when your car is ready. Delays on either end waste your limited coverage days.
Document Everything
Keep all rental receipts and documentation. Your insurance company will need these to process reimbursement. Some insurers work directly with rental companies, while others require you to pay and then reimburse you.
Understand Your Insurer's Process
Some insurance companies have relationships with specific rental car companies that streamline the process. Ask your insurer which rental companies they work with and whether they offer direct billing.
Choosing the Right Coverage Level
If you decide to add rental reimbursement, selecting appropriate limits ensures adequate protection without overpaying.
Consider your typical rental car needs. Do you need just basic transportation, or do you want something similar to your current vehicle? Check current rental rates in your area to understand what different daily limits would provide.
For most drivers, a middle-tier option like $40-$50 per day provides adequate coverage without excessive cost. This typically covers a compact or mid-size rental car, which suffices for most temporary transportation needs.
If you drive a larger vehicle like a minivan or SUV and need that size to accommodate your family, consider higher daily limits to ensure you can rent a comparable vehicle.
The Bottom Line
Rental reimbursement coverage is one of the most affordable optional coverages you can add to your auto insurance policy. For a cost that's often less than a tank of gas per year, it provides peace of mind and financial protection when your vehicle is being repaired.
Whether you need this coverage depends on your personal situation. If you rely heavily on your vehicle, don't have backup transportation, or would struggle with unexpected rental expenses, the modest cost is almost certainly worthwhile. If you have multiple vehicles, rarely drive, or have ample savings for unexpected costs, you might reasonably choose to skip it.
The coverage is easy to add or remove, so you can adjust it as your circumstances change. Review it annually along with the rest of your policy to ensure it still matches your needs.