Rental Reimbursement

What is rental reimbursement, when to rent a car, why you may not want the rental company’s “insurance”, and using the coverage.

She may need a rental car after her accident.

Consider this: you got hit and your car sustained some pretty decent damage. No one was hurt, thankfully. You filed a claim on your vehicle, the adjuster took a look at it and everything is in order. The shop says you’ll have your ride back in a few days.

That’s all fine and good, but you still need a car to get to work. What are you going to do in the meantime? Take the bus?

Borrow Uncle Maynard’s ’72 Pinto?

Fortunately many insurance companies are way ahead of you on this. They offer rental reimbursement coverage.

How Rental Reimbursement Works

Rental reimbursement coverage, also known as “loss of use,” is an optional auto insurance coverage which is often considered in the same breath as towing or roadside assistance coverage. It’s not required by anyone and often overlooked, sometimes even by agents. However, like towing and roadside assistance, it’s not very expensive and real nice to have when you need it.

As with any other coverage there can be differences between companies. Rental reimbursement coverage is typically offered on a per diem basis. This reimbursement is typically capped at around $25/day for a set amount of time, say six weeks. You go to any car rental establishment, pick up a rental on your own dime and your insurance company reimburses you directly.

It’s pretty straightforward.

Renting a Car With a Common Pitfall

However, renting a car often poses its own set of insurance-related challenges. Regardless of why you’re renting a car in the first place, most car rental agencies will try to upsell you on their own insurance. Keep in mind, this is often not technically “insurance” per se, but a reimbursement scheme for any damages they may charge you.

Many people take this insurance not realizing their own insurance company would cover them in a rental at the same levels of coverage they have with their own car. In addition this is usually the case if you’re renting anywhere in the United States or Canada. It’s good stuff to know both if you’re in an accident or if you’re going on vacation. Before paying for a potentially unnecessary “service,” ask your agent if your policy covers you driving a rental.

Also keep in mind most auto rental companies won’t rent to anyone under 25, period. If this applies to you, that Pinto may be your only option despite your rental reimbursement coverage.

To Rent or Not to Rent

One nice thing about rental reimbursement coverage is that often times you don’t need to actually rent a car to qualify for it. If you file a rental reimbursement claim and are approved, the insurance company just sends you a check. They’re not going to follow up to see if you actually rented a car.

Since it’s technically a loss of use coverage, you could use the money to compensate a family member for temporary use of their car. Alternatively, you could just pocket the money if you so desired. It’s entirely up to you. Check with your insurance agent to make sure this is OK first, but chances are it is.