Auto Insurance Basics

Rental Reimbursement Coverage - What Is It and Do I Need it?

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Rental reimbursement helps cover the expense of a rental car while your vehicle is being repaired in the body shop after a covered accident. It’s an option with auto insurance policies that is fairly inexpensive and might be worth the investment to some drivers. If you live in the state of Virginia, rental reimbursement is called “transportation expense” but the two terms are synonymous. 

Insurance companies require policyholders to have collision or comprehensive coverage first in order to be eligible for rental reimbursement. The reason is if a driver’s insurance company is going to cover the cost of their rental car, the insurance company wants to make sure the driver is well-covered in the event of an accident. The need for a temporary replacement vehicle is typically on the heels of an accident that would have been covered under your auto insurance’s collision or comprehensive coverage. Once you’re eligible, purchasing the option is easy - it’s simple as clicking a button online or calling your agent and asking them to add the coverage to your policy.

What Does Rental Reimbursement Cover?

What rental reimbursement covers and what it doesn’t is important to understand. It only pays the cost of a rental vehicle while repairs are made to your car due to a covered loss. Examples of covered losses typically overlap with accidents that fall under your collision or comprehensive coverage, such as:

  • Collision with another vehicle
  • Crashing into a stationary object
  • Hitting deer or other wildlife on the road

Note that your insurance company will only reimburse you for the daily rental rate. Other expenses such as the cost of gas or security deposit for the car are generally your responsibility. Furthermore, it will not cover the cost of a rental while your vehicle is undergoing routine maintenance in the shop, or while you're on vacation or some other recreational activity. 

Rental cars aren’t the only option. In an effort to keep daily limits low (along with their auto insurance premium) companies allow policyholders to put money toward public transportation instead of a rental car. 

How Does Rental Reimbursement Insurance Work?

Policyholders have the right to choose any rental car service, whether its through an affiliate of their insurer, or an independent rental agency. but iIf they choose one that partners with their insurer, the rental car company can bill the insurer directly. This is convenient because the policyholder doesn’t have to take the time to file a reimbursement of the cost of the rental car. They simply sign, drive, and pick up their vehicle when it’s fixed. For example, GEICO partners with Enterprise Rent-A-Car for this purpose.

Make sure the rental car company is aware of the situation if you arrange your replacement independently - you will get a discount. Even if you can’t get a vehicle through a rental car company partnered with your insurer, companies offer discounts to those renting due to an accident. We confirmed with spokespersons at The Hertz Corporation and Enterprise Holdings that there are lower rental car rates available to those involved in an accident, regardless of their insurance company. The rate for someone in that circumstance is more competitive than standard ones and to qualify, all someone has to do is notify the local agent at the car rental company. The amount of discount is difficult to determine, since rates will vary by the type of car, the location of the agency, and the availability in their parking lot. 

Your car insurance company typically has two types of parameters for reimbursing your temporary rental: a daily rate and a per claim limit. For example, some of the major insurers offer a package that reimburses you up to $30 per day up to $900 per accident. If you happen to live in a city where the cost of renting a car is more affordable, say $20 per day, then your rental reimbursement insurance can subsidize the cost of your rental for up to 45 days.

Do I Need Rental Car Reimbursement Coverage and If So, How Much?

Each individual needs to take a number of things into consideration when determining if they should purchase rental reimbursement coverage. First, decide if you can afford to repair your vehicle and cover the cost of a rental car out-of-pocket. Renting a car for a few days can add up and there’s no telling how long a repair will take. It could be weeks. If your finances are tight, think about adding reimbursement coverage to your policy for a few dollars each month to protect against a potential future spike from repair costs.

How much rental reimbursement coverage someone needs also depends on the individual. A vehicle owner can offset the cost of a rental car substantially (especially if they need it for an extended period), for only a couple dollars per month. Even if the limit per day doesn’t cover the cost per day of a rental car, a policyholder with coverage could end up paying much less. For drivers accustomed to luxury vehicles or larger families who need the space of an SUV, the cost of renting those vehicles will be higher and they should consider purchasing more coverage. In some places, like New York City, the cost of renting a SUV can be more than twice what it costs to rent an economy-class vehicle. 

Consider also how much it costs to rent a car in your city when balancing whether the additional monthly premium makes sense for the amount of coverage. For example, if it costs you $3 a month for a $30 per day reimbursement rate, but rentals for an economy car start at $50 a day where you live, you might feel more comfortable going for more coverage for peace of mind. Here's a table of car rental rates across a random sample of cities in America:

Cost to Rent Vehicles in Different Cities (per Expedia) per Day*:

Location Economy Mid-Size SUV
New York, NY $50-78 $79-177
Chicago, IL $37-46 $54-90
Orlando, FL $28-37 $63-74
Witchita, KS $34-55 $51-88
Los Angeles, CA $25-32 $50-89
Columbus, OH $34-48 $55-72

*Plus the nominal taxes and fees that apply to every rental car company in every state.

How Much Can Rental Reimbursement Coverage Cost?

Below are what it would cost a sample 30-year-old male in Indiana with a Toyota Camry to add rental reimbursement coverage by auto insurance company. The cost below is the amount that would be added to the policyholder’s monthly premium. Beside it is the corresponding daily limit and total limit per claim. There are no deductibles associated with rental reimbursement coverage.

Your actual quotes will differ based on who your insurer is, the type of car you have, where you live, and what your past driving experience has been.

Estimated Monthly Cost of Rental Reimbursement Coverage for Sample 30-year-old Man in Indiana:

Company Reimbursement Coverage Est. Monthly Rate
State Farm $25/day ($600 max per incident) $1.36
$50/day ($1,200 max per incident) $2.68
80% of the rental cost/per day ($1,500 max per incident) $1.55
GEICO $30/day and ($900 max per incident) $2.35
$50/day and ($1,500 max per incident) $3.93
Esurance $30/day ($900 max per incident) $3.91 
$40/day ($1,200 max per incident) $5.10
Nationwide $30/day ($900 max per incident) $3.45
$40/day ($1,200 max per incident) $4.93
$50/day ($1,500 max per incident) $6.48
$60/day ($1,800 max per incident) $8.00
$75/day ($2,250 max per incident) $10.47
$100/day ($3,000 max per incident) $12.93
Travelers $30/day ($900 max per incident) $9.00
$40/day ($1,200 max per incident) $11.00
$50/day ($1,500 max per incident) $13.00

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