Rental Car Reimbursement

Whether it's because of an accident or damage due to harsh weather, there are times when your vehicle may need to be in the shop for an extended period of time. Rental cars provide reliable transportation when your primary car is out of commission.

Although your car insurance should cover the majority of the repairs, rental fees can put a serious strain on your budget if you need a car for more than a few days. Adding rental car reimbursement to your policy can help you save money, but whether the extra cost is worth it depends on your situation.

Rental Car Reimbursement Explained

Coverage for rental cars isn't a standard part of auto insurance policies. This optional insurance is used to cover the cost of renting a car if your vehicle gets stolen or is damaged as the result of a collision, severe weather conditions or vandalism. For an additional monthly fee, your insurance company will pay for transportation to keep you on the road until your own car is back in commission.

There are two ways to take advantage of coverage for a rented vehicle:

  • Choose the most convenient rental car company, pay out of pocket and submit the bill to your insurance provider for reimbursement.
  • Rent a vehicle from a company approved by your provider and let the insurance pay for it directly.

Either way, you can save on the cost of the rental and not have to worry about additional costs on top of the deductible for repairs.

What Coverage Can You Expect?

With this type of car insurance, you only get back what you pay for the rental. Your main insurance policy covers damages for your regular vehicle and generally won't include funds for alternate transportation. If you want to have rentals taken care of, you have to ask for the coverage to be added to your policy.

The particulars of rental reimbursement vary from one insurance company to another. Some only offer coverage after an accident and not for anything falling into the category of a natural disaster. Most insurers also limit the amount you can spend per day, how long you can rent another vehicle and how much total coverage you can claim per incident.

For example, if you're involved in a collision and your car needs to be in the shop for three weeks to fix extensive damage, your insurance provider may agree to pay for $30 of rental fees per day to cover this time but limit you to spending a total of $700 for the duration of the repairs. Reimbursement amounts may be higher or lower depending on your company's policies.

If you don't have rental coverage, you might still be able to save some money by renting a car through your insurance provider. Some companies are able to secure lower per-day rates to make alternate transportation more affordable for clients.

Pros and Cons for Rental Reimbursement

When deciding whether rental reimbursement coverage is right for you, weigh the advantages against the disadvantages and see how they stack up. The perks of this coverage include:

  • Affordable rates starting as low as $2 per month.
  • No deductible for most policies.
  • Peace of mind knowing that you always have transportation in the event of an accident or unexpected natural disaster.
  • No hassle with paperwork or billing if your auto insurance company handles the rental.
  • Availability regardless of the at-fault party in an accident.

However, some disadvantages could be deal-breakers depending on your needs and circumstances:

  • Payments may turn out to be more expensive than renting on your own.
  • Filing a claim for a rented vehicle means waiting for insurance compensation.
  • You have to pay for any costs above the promised reimbursement.

You may be able to bypass rental car reimbursement if the other driver is at fault in an accident. In these cases, their insurance can provide a rental to you, but you have to wait for fault to be determined and could be without transportation for several days or even weeks.

To determine if rental car reimbursement is worth the extra monthly fee, consider the area in which you live and the conditions to which your car is routinely exposed. If your car is at a high risk for being damaged, vandalized or stolen or your location is subject to bouts of severe weather, it may be prudent to ensure that you can rent a temporary replacement whenever you need it without having to pay out of pocket. It would be wise to talk with your auto insurance agent about whether rental coverage is a cost-effective option for you.