What is Rental Reimbursement?
There are many types of coverage when it comes to car insurance. One such coverage is rental reimbursement, which covers the expense of a rental car if your car is out of commission while being fixed after a covered accident. But how exactly does rental reimbursement coverage work, and do you need it?
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How does rental reimbursement coverage work?
Rental reimbursement covers the cost of a rental car in certain circumstances. The repair must be related to an accident that was covered under your collision and comprehensive coverage, including car accidents, theft, vandalism, or severe weather, and will not cover normal maintenance or repairs. If you don’t have collision or comprehensive insurance, you won’t be able to opt for rental reimbursement coverage.
There are two ways you can choose a rental car agency. First, you can contact your insurance company, and they will give you a list of approved providers to choose from. Second, you can choose your agency of choice. If you choose an approved rental car agency, the agency will bill your insurance company directly. If you choose a different agency, you’ll have to pay the costs up front, and then submit a claim to your insurance company for reimbursement. Make sure you mention that you’re renting the car for insurance reimbursement because the rental company may offer you a discount.
Premiums are typically determined by a pay-per-day and per-accident limits. For example, you may have a policy that covers $25 per day and $750 per accident. This means you’ll have to pay out of pocket after you reach your $750 limit, or if you rent a car that’s more than $25 per day.
If rental rates are high where you live and you expect your car to be out of commission for a while, it’s a good idea to opt for the cheapest rental car possible to avoid having to pay out of pocket if you exceed your per-accident limit. That might be difficult if you’re used to driving a truck or large SUV and have to rent a compact sedan, so consider whether the potential out-of-pocket expense might be worth it for you.
Is rental reimbursement coverage required?
Rental reimbursement is optional, and not required by any state. However, it’s worth considering if you don’t have any secondary mode of transportation, as rental car fees can add up quickly — especially if you need it for multiple weeks.
If you have a healthy emergency savings account, you may easily be able to cover the cost of a rental if your car is in an accident, and therefore the additional cost to add rental reimbursement coverage might not be worth it. But in general, rental reimbursement coverage doesn’t cost a lot, so it may be worth it regardless of your financial situation if it only adds a couple of bucks to your monthly premium.
Rental reimbursement coverage can come in handy if your car requires extensive (and lengthy) repairs after an accident. To find out how much it would cost to add rental reimbursement coverage to your car insurance policy, contact your insurance provider for a quote.
Catherine Hiles (she/her) is a native Brit living and working in Dayton, Ohio. Cat has written about a variety of subjects, including finance, cars, and parenting. She is a frequent contributor to Dayton Mom Collective, The Penny Hoarder, and WDW Magazine.
Cat lives with her husband, their two kids, and their energetic pitbull mix. She counts running, lifting weights, walking, and reading among her hobbies. See more articles by Cat.