Rental reimbursement coverage: When will my insurance pay for a rental car?

March 26, 2021

Learn how your auto insurance can help pay for a rental with rental reimbursement coverage

A woman receiving keys to a rental car

Whether you drive a sports car, minivan, pickup truck, or SUV, our vehicles are an essential part of everyday life. We rely on them to go to work, pick up the kids, drive to school, and run essential errands. So, if your vehicle is stuck in the shop after an accident, a rental car is often your only option. As you likely know, that can add up quickly. 

Fortunately, if you have rental reimbursement coverage, your auto insurance may be able to help. But when will your insurance pay for a rental car? How does rental reimbursement coverage work, exactly? Today, we'll take a closer look at this optional addition to your auto insurance policy, so read on!

What is rental reimbursement coverage? How does rental reimbursement coverage work? 

Rental reimbursement coverage is a service provided by most insurance companies, and is usually an optional addition to your existing coverage. For an additional premium, your insurance would reimburse you for the cost of renting a supplemental vehicle while repairs are being made to your everyday vehicle.

Like many insurance products, rental reimbursement is usually available with different levels that correspond to different daily limits and maximum limits. For example, your insurance provider may offer something like $25 per day with a $750 maximum, but also offer $100 per day with a $3000 maximum. Of course, the greater the limit, the larger the premium. 

When will my insurance pay for a rental? 

On occasion, there is confusion regarding whether or not rental reimbursement is included with a standard auto insurance policy. In part, this is because a small number of carriers do include it. However, most carriers offer rental reimbursement as an optional, additional feature and will not include it unless requested. That's why it is always a good idea to check your policy, or speak with your agent, in order to make sure you know what your policy entails. 

Once rental reimbursement coverage has been added to your policy, your insurer will reimburse you for the cost of a rental (up to the stated limits) in the event that your vehicle is disabled due to a loss that is covered by your policy.  

Additionally, an insurance carrier may also require that the repairs, or disablement, exceed a certain period of time before rental reimbursement applies. For example, the policy might require a vehicle to have been withdrawn from service (i.e. disabled) for more than 24 hours.

To summarize, your insurance will likely reimburse the cost of a rental if you have rental reimbursement coverage added to your policy and your vehicle is disabled due to a covered loss for more than 24 hours. 

If my car breaks down, will my insurance cover a rental?

Yes and no. When most people say that their car "broke down," they are referring to some sort of mechanical failure that is the result of use or wear and tear. Perhaps the engine died after 250,000 miles and needs to be replaced. In that situation, your insurance would not cover rental reimbursement. 

However, if your engine dies because it was just damaged in an accident, or if your car is otherwise disabled in a wreck of some kind, your insurance very well could provide rental reimbursement for a substitute vehicle while repairs are being made. Similarly, if your vehicle was stolen, or damaged severely by hail, you may qualify for rental reimbursement. 

To be more specific, rental reimbursement will only apply if your vehicle is disabled due to what is known as a covered loss. 

What qualifies for a covered loss for rental reimbursement?

Most insurance companies require you to carry both Other Than Collision coverage (OTC) and Collision coverage before they offer a rental reimbursement option. For the purpose of rental reimbursement, a covered loss refers to anything covered by both of these policies. As a refresher, let's take a quick look at what sorts of losses OTC and Collision typically cover.

Collision. Remember, in the event of an automobile accident for which you are at fault, basic liability insurance only covers the other party's vehicle. In that same scenario, Collision coverage would pay for your vehicle as well. Furthermore, Collision coverage would pay to fix your vehicle if you have an accident with something other than a vehicle, such as a lamp post or street sign. 

OTC. Other Than Collision, also often called Comprehensive Coverage, covers losses that occur outside of collisions. Common causes of loss include fire, theft, hail, and vandalism. 

Before you add rental reimbursement coverage to your auto insurance policy, make sure to check up on your policy details with your agent or carrier to be sure you know what losses are covered.

Who covers rental reimbursement when you're not at-fault?

If you have been in an accident and you are not the at-fault party, rental reimbursement falls upon the at-fault party's insurance to pay. In such a case, you will need to speak with the at-fault insurer for details regarding the rate per day, as well as the length of time they're willing to cover. 

Their insurer will cover your rental for what they deem is a reasonable amount of time for the repairs to be complete. However, you'll want to stay in contact with the claims adjuster and inform them of any possible complications or delays that could potentially extend the amount of time you need the rental. 

Is rental reimbursement worth it?

It is obviously difficult to predict how often you may have a need for something like rental reimbursement coverage; you can't very well know if you're going to be in an accident in the future. Instead, it can be helpful to consider how you might be affected by an accident that results in your vehicle being in the shop for a number of days. 

If such a scenario would leave you without a mode of transportation, then adding rental reimbursement to your auto insurance policy will more than likely be an important addition. Although coverage options and premiums vary from carrier to carrier, rental reimbursement coverage can generally be added to your existing auto insurance policy for a reasonable cost. 

Before purchasing rental reimbursement coverage, it's Important to think about the type of vehicle you currently rely on and what requirements you might have for a rental substitute. Do you simply need a set of wheels to get you from point A to B, or do you need extra room for kids, soccer equipment, and perhaps a bulky cello? The type and class of vehicle you'll need will have an impact on the amount per day you'll need to have reimbursed.

For example, an economy class car might only cost you $28 a day, while a luxury SUV could easily exceed $35. Consider this carefully, as any excess of that daily limit will have to be covered by you, the insured. Fortunately, carriers usually offer a wide range of daily limits for rental reimbursement, from as low as $20 a day up to $100 day. 

A clerk passing rental car keys to a woman

To learn more about Germania's rental reimbursement coverage and other auto insurance products, request a free quote online or reach out to your local Germania agent today! 

by Geoff Ullrich

About the Author

Geoff Ullrich is a writer and Content Marketing Specialist at Germania Insurance.