Does Car Insurance Cover Rental Car Costs?

Car insurance covers rental car costs only when you have rental reimbursement coverage added to your policy and your car is being repaired after a covered claim. This optional add-on, also called rental car reimbursement or transportation expense coverage, typically costs $5 to $15 per month. Without it, your standard car insurance coverage won't pay for a rental while your car is in the shop.

Rental reimbursement coverage pays for a rental in these specific situations:

•       Your car is in the shop after a collision claim (another driver hit you, you hit something or your car was damaged in a single-vehicle accident)

•       Your vehicle is being repaired after comprehensive coverage paid out for damage from hail, a fallen tree, fire, theft recovery or flooding

•       An at-fault driver's liability insurance is paying for your repairs and is also covering your rental costs through their policy

•       You carry uninsured motorist property damage coverage and an uninsured driver damaged your car

Rental reimbursement won't pay in these situations:

•       You're renting a car for a vacation, business trip or any reason unrelated to your car being in the shop

•       Your car is in the shop for routine maintenance, mechanical repairs or recalls, which are not covered insurance claims

•       You carry liability-only insurance and were at fault, so there's no collision or comprehensive to trigger a claim and no rental reimbursement starts

•       Your claim falls below your deductible threshold, meaning you're paying out of pocket rather than using insurance

The key decision point with rental reimbursement coverage is whether your daily limit actually matches what rentals cost in your area. Most insurers offer limits in tiers, commonly $30, $40 or $50 per day, with a total maximum of $900 to $1,500. The problem is that rental car rates have climbed. A standard economy car now runs $60 to $100 per day in many U.S. markets, and SUVs or minivans run $90 to $150 per day.

If your policy pays $40 per day and the cheapest available rental is $75 per day, you're covering $35 out of pocket every day your car is in the shop. A repair that takes 10 days means $350 in out-of-pocket costs even though you have coverage. Check your policy's declarations page and compare the daily limit to current rental rates in your area before assuming your coverage is enough.

Some insurers, including USAA and Amica, offer higher daily limits or allow policyholders to select limits that better match actual market rates. When shopping for rental reimbursement coverage, choose the highest daily limit your insurer allows. The premium difference between a $30 per day limit and a $50 per day limit is usually less than $2 per month.

Rental reimbursement coverage has no deductible of its own, so you don't pay anything out of pocket for the reimbursed portion of your rental. But the deductible on the underlying claim still applies. If your car needs $2,000 in collision repairs and you have a $500 deductible, you pay $500 toward the repairs and your insurer covers the rest. Rental reimbursement pays separately for your temporary vehicle while your car is in the shop.

Rental reimbursement coverage itself doesn't raise your rates. It's the underlying claim that affects your premium at renewal. If you file a collision or comprehensive claim and also use your rental reimbursement benefit, your insurer counts one claim, not two. Using rental reimbursement doesn't add a separate mark against your record.

Whether that underlying claim raises your rates depends on fault, your insurer's surcharge policies and your claims history. At-fault collision claims typically increase premiums by 20% to 40% at renewal. Comprehensive claims for weather, theft or vandalism often don't raise rates at all, since they're considered non-preventable. Ask your insurer about its forgiveness policies before filing if you're unsure.