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Your auto insurance policy won’t cover the cost of a rental vehicle if your car breaks down. But if you’re involved in an accident and need to send your car to the shop for repairs, rental reimbursement coverage can help pay for the cost of a rental.

Here’s what you need to know about rental reimbursement coverage:

When will insurance pay for a rental car?

Insurance will pay for a rental car when your insured vehicle suffers a covered loss. You’ll need to have full coverage car insurance, or at least collision or comprehensive coverage.

For example, if you have collision coverage, your rental car reimbursement endorsement would pay for you to rent a car after an accident so you can get your car repaired. If you have comprehensive coverage and your car is stolen, you’d be able to use your rental car coverage then, too.

This probably goes without saying, but insurance won’t pay for you to rent a car on vacation. It also won’t reimburse you for a rental car while your car is in the shop for mechanical problems or routine maintenance. Those aren’t perils covered by auto insurance. So, if you’re getting new brakes or having an oil leak fixed, you’ll need to pay for a rental car out of pocket.

What is rental reimbursement coverage?

Rental reimbursement coverage is an optional coverage that you can add to your auto insurance policy to help cover the cost of a rental car while yours is being repaired following a covered loss. It won’t reimburse you if you need a rental while your car is in the shop for routine maintenance, mechanical issues, or other reasons not covered by car insurance.

Tip: Rental reimbursement coverage isn’t limited to rental cars. It can help pay for other transportation costs, like bus fares or rideshare fees, if you can’t get a rental car.

Car rental coverage isn’t included in your policy, and you’ll typically need to have collision or comprehensive insurance in order to add it. However, the cost to add rental car coverage is minimal — so low that if you need to use it even once, you’ll be glad to have it.

Check Out: Rental Car Insurance: Do You Need It?

Do you need rental reimbursement coverage?

If you could easily afford to pay for a rental car for a month or longer, then you don’t need rental reimbursement coverage.

That said, it can be awfully nice to have. You never know how expensive rental cars might be when you need one, and some insurers have deals with certain rental agencies to help you get a better price on a loaner. That lower price could be a big deal if your car is in the shop for weeks.

Plus, it can be more convenient to have your own coverage, regardless if you’re at fault in an accident or not. The other driver may be uninsured or underinsured, so you can’t assume that someone who hits you will be capable of paying for your rental expenses.

Even if the other driver’s insurance will pay for your rental car, it can be easier to rely on your own rental coverage. All you need to do is inform your insurer, and it’ll deal with the other driver’s carrier and work to get you reimbursed.

How does car rental reimbursement work?

Most insurers will cover a rental for up to 30 days. When you file a claim, your insurer will extend coverage up to your rental car reimbursement limit.

For example: Say your limit is $30 a day up to $900 total. If you select a vehicle that costs $50 a day or if your car isn’t fixed after 30 days, you’ll pay out of pocket for some of your rental expenses.

Your insurer might also cover a percentage of your rental car costs up to an overall limit. You’ll share the cost, but you won’t be subject to a daily limit.

If your car is totaled in an accident, you’ll have 30 days — or whatever the maximum number of days your insurer sets for its rental reimbursement coverage — to replace your car. Once you’ve accepted the loss settlement from the insurance carrier and received your claim payment, it’s your responsibility to take that money and replace your car.

You could choose to spend some of the claim payment to keep your rental longer while you shop around. But once you’ve been made whole, your insurer is off the hook for the cost of your rental.

Learn More: What Is a No-Fault Accident?

How to purchase and use rental car reimbursement coverage

It’ll vary depending on your insurer, but in general, here’s how to purchase and use rental car reimbursement coverage:

  1. Purchase a rental coverage endorsement for your vehicle. Check your auto insurance declarations page to see if you have this coverage. If not, contact your insurer and ask to add it to your policy. Pay the additional premium so your coverage becomes effective.
  2. File a claim. If you need to file a claim for a covered peril, your rental car reimbursement coverage should automatically kick in.
  3. Choose a rental car within coverage limits. Ask your insurance agent, claims specialist, or customer service agent if your insurance company has contracted with any rental agencies. If so, check those companies first. Your insurer may be able to pay them directly for your rental and save you on out-of-pocket costs. If not, shop around to find the best rental car rates in your area.
  4. Work with the rental agency to confirm coverage. When you reserve your rental car, make sure to let the agent know that you’re renting it because of your insurance claim. Ask what the rental car rate will be and if the company will bill your insurer directly. If there’s any discrepancy between what your insurer and the rental agency tell you, clear it up before you sign the rental paperwork and drive off.

Frequently asked questions about rental car coverage

Will car insurance pay to tow my car if it breaks down?

Your car insurance may pay for a tow truck if your car breaks down. Check your policy to see if you have roadside assistance coverage. You might also have this coverage if you’re a member of the American Automobile Association (AAA) or if you have a credit card with this coverage.

What do I do if I get in an accident in a rental car?

If you get in an accident while you’re driving a rental car, you should take the same steps you would with any other accident: Report it to the police, exchange information with the other driver, and notify your insurance company.

You’ll also want to report the incident to the rental car agency and arrange for a replacement rental car.

How much is car rental coverage?

Car rental coverage is inexpensive compared to liability, collision, and comprehensive insurance. It may cost you less than $20 for six months of car rental coverage, depending on your insurance carrier.

That’s because your insurer knows it won’t have to pay much if you need to use your rental car reimbursement. And since you can only use it after an accident or covered loss, you likely won’t need to use it very often.

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About the author
Amy Fontinelle
Amy Fontinelle

Amy Fontinelle has been a personal finance writer since 2006. Her work has been published by Forbes Advisor, Capital One, MassMutual, Prudential, Reader’s Digest, The Motley Fool, Investopedia, International Business Times, Business Insider, Bankrate, and other outlets.

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