Understanding your car rental reimbursement coverage: what to know

Overview: When looking at your auto insurance coverage it may be confusing because the word “rental” may be used in different ways depending on your policy and insurer. When you think of rental coverage you may think of insurance that covers you when renting a car. However, there's another type of coverage called car rental reimbursement that may cover your temporary transportation needs, such as a rental car, if your personal insured vehicle has a covered loss.

What is rental reimbursement coverage?

Rental reimbursement coverage (sometimes called transportation expenses or substitute transportation) is an optional add-on to your existing auto insurance policy. The coverage is intended to help cover temporary transportation costs when your insured car is in the shop or not drivable due to a covered loss. The coverage might help pay for a rental car, or possibly other transportation like bus fare or rideshares (Uber/Lyft), ensuring you are able to get where you need to.

What does rental reimbursement do?

If you have this coverage, its main job is to help cover the costs of substitute transportation while your insured car cannot be driven because it's being repaired. The reason for the repair must be due to a covered loss. This usually means damage covered by your policy's comprehensive coverage (like theft, storm damage, hitting an animal) or collision coverage (damage from a crash).

Scenario: Your car is hit by a fallen tree during a storm. It is undrivable due to the damage, but you have comprehensive coverage to cover the cost of repairs. Your policy also includes rental reimbursement coverage which allows you to rent a car while your car is being repaired. You work miles from home, and it would be extremely inconvenient to go without a car.

How does it work?

This coverage applies only if there is a covered loss under your policy's comprehensive or collision coverage. If your car is undergoing routine maintenance (like an oil change) or a mechanical breakdown not covered by your policy, rental reimbursement does not apply.

Scenario: Your car is in the shop for a tire rotation and to fix the air conditioning. You don’t have another car to use, so you’d like to use rental reimbursement to get a rental car while your car is being repaired. In this situation, rental reimbursement coverage would not be available since there was no covered loss under comprehensive or collision — maintenance repairs are not covered.

Rental reimbursement coverage vs. rental car insurance

Rental reimbursement coverage:

• Helps provide temporary transport while your insured vehicle is being repaired after a covered comprehensive or collision claim.
• Optional add on coverage to your personal auto insurance.

Rental car insurance:

• Offers coverage for damage to the rental car or liability coverage on accidents with the rental car.
• Options offered by the rental car company itself or sometimes through your credit card when you rent a vehicle.
• Applies when you are renting a car for a vacation, a business trip, or a different non-claim related need.
• If you are not renting for a business purpose, your personal auto policy may be enough sufficient coverage that you decide not to purchase this extra coverage through the rental car company.

Understanding coverage limits

If you have rental reimbursement coverage, it usually comes with specific limits for reimbursement. These limits determine the maximum amount your policy might pay per claim.

• Per day limit — maximum amount the insurer will pay each day you need transport assistance.
• Per loss limit — total maximum dollar amount for substitute transportation costs from any one single covered accident.

Scenario: Your per day limit is $30 and your per loss limit is $900. Therefore, your insurance company may pay up to $30/day for your rental needs up to a total of $900 for a covered loss.

If your rental or transportation costs exceed your policy limits, you may be responsible for paying the difference out of pocket. Understand the daily rental rate of the rental vehicle you choose to maximize your benefits.

How reimbursement claims may work

• You might choose to work with a preferred partner. Some insurance companies partner with specific rental agencies, which may allow for direct billing to the insurer up to coverage limits.
• You may cover the costs upfront and get reimbursed. If you use a different rental company or other transport methods outside of your insurance’s preferred partners, you usually pay the costs first and then submit receipts to your insurance company for reimbursement up to the per loss limit.
• Your policy will have a coverage timeline. Check your policy details for specific rules about when coverage begins such as after a certain waiting period or when repairs start. And when it ends, such as when repairs are completed or the per-loss limit is reached.

What rental reimbursement doesn’t cover

The coverage provides for the substitute transportation itself. It does not cover every vehicle or rental related expense. Coverage usually does not include the following:

• Gas or fuel for the rental car.
• Extra mileage charges from the car rental company (unless included in the base daily rate).
• Security deposits required by the rental company.
• Any insurance or damage waivers you decide to purchase for the rental car.

Understand your current policy

Rental reimbursement coverage may be beneficial in the event your car is not drivable or is in the shop as a result of a covered loss. It is important to know the difference between rental reimbursement coverage and rental car insurance. Both are helpful but one applies to your personal vehicle while the other applies to a rental car.

Always review your own auto insurance coverage or speak with your agent to understand if you have rental reimbursement coverage already and what its specific limits and conditions are. To discuss your rental reimbursement options, contact a State Farm agent today.

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