Rental Reimbursement Coverage: What Is It and Do I Need It?
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Rental reimbursement helps cover the cost to rent a car while your vehicle is being repaired 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.
Note: Insurance companies require policyholders to have collision or comprehensive coverage first in order to be eligible for rental reimbursement.
What does rental reimbursement cover?
Rental reimbursement 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 a 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, while you're on vacation or during some other recreational activity.
Rental cars aren't the only option. To keep daily limits and your auto insurance premiums low, companies often allow you to put money toward public transportation instead of a rental car.
How does rental reimbursement insurance work?
You have the right to choose any rental car service, whether it's an affiliate of your insurer or an independent rental agency. If you choose an affiliate partner through your insurer, the rental car company can directly bill the insurer. This is convenient because you don't have to take the time to file for reimbursement of the rental car's cost. You'd simply drive the rental car until your vehicle is 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. Rental car companies offer discounts to those renting due to an accident.
We confirmed with spokespeople at The Hertz Corp. and Enterprise Holdings that lower rental car rates are available to those involved in an accident, regardless of their insurance company. The rate for someone in that circumstance is more competitive than standard rates, and to qualify, all you have to do is notify the local agent at the car rental company. The exact discount amount is difficult to determine since rates will vary by the type of car, the agency's location and availability.
There is no deductible for rental reimbursement. Instead, your car insurance company typically has two parameters for reimbursing your temporary rental: a daily limit and a per-claim limit. For example, some of the major insurers offer a package that reimburses you for up to $30 per day and 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?
There are a number of things to consider when deciding if you should purchase rental reimbursement coverage. First, determine 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. If your finances are tight, think about adding reimbursement coverage to your policy. Paying a few dollars each month for it could protect against a potential future spike in costs.
How much rental reimbursement coverage you need also depends on your unique situation.
For drivers accustomed to luxury vehicles or larger families who need 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 an SUV can be more than twice what it costs to rent an economy-class vehicle.
Consider 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 benefit, but rentals for an economy car start at $50 a day where you live, you might feel more comfortable with 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 | Midsize SUV |
|---|---|---|
|
New York, NY | $50-$78 | $79-$177 |
|
Chicago, IL | $37-$46 | $54-$90 |
|
Orlando, FL | $28-$37 | $63-$74 |
|
Wichita, KS | $34-$55 | $51-$88 |
|
Los Angeles, CA | $25-$32 | $50-$89 |
|
Columbus, OH | $34-$48 | $55-$72 |
These daily rates do not include the nominal taxes and fees that apply to every rental car company in every state.
How much does rental reimbursement coverage cost?
It costs about $4 per month to add rental car reimbursement coverage to your car insurance policy.
Estimated monthly cost of rental reimbursement coverage
Company | Compact car $30-40/day | SUV $40-50/day |
|---|---|---|
| State Farm | $2 | $3 |
| Geico | $2 | $4 |
| Esurance | $4 | $5 |
| Nationwide | $4 | $7 |
Rates for a 30-year-old driver in Indiana with a Toyota Camry
For a policy with a $30 limit per day, there's typically a $900 maximum per incident, which could let you have a rental car for up to 30 days while your car is in the shop. A limit of $50 per day typically has a $1,200 to $1,500 limit per incident, which could get you a rental car for 40 to 50 days.
There are no deductibles associated with rental reimbursement coverage. Your actual quotes will differ based on your insurer, the type of car you have, where you live and your past driving experience.
Frequently asked questions
How much does rental reimbursement cost?
Rental reimbursement costs less than $5 per month, on average.
Can I get rental reimbursement in Virginia?
In Virginia, rental reimbursement coverage is called "transportation expense coverage," but the two terms are synonymous.
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