What your car insurance actually covers for rental cars
Most car insurance policies do not automatically cover rental cars. You have to add rental reimbursement coverage (sometimes called rental car coverage) as a separate option when you buy or renew your policy. Without it, you pay for a rental car out of your own pocket if yours is damaged or stolen.
If you do have rental coverage, your insurer will pay the rental company directly or reimburse you after you pay. The coverage kicks in only when you have a covered claim — a collision, theft, weather damage, or another event your policy covers. It does not pay for a rental if you simply want to drive something else while your car is in the shop for maintenance.
The amount your insurer will pay is limited. Most policies cap rental coverage at $30 to $50 per day, with a total limit of $900 to $1,500 per claim. If you rent a car that costs more than your daily limit, you pay the difference yourself.
Key Takeaways
- Rental car coverage is an optional add-on to your policy and does not come automatically with standard collision or comprehensive coverage.
- Coverage only applies when your car is damaged or stolen by a covered event, not for routine maintenance or when you simply want an extra vehicle.
- Your insurer sets a daily limit (usually $30 to $50) and a total limit per claim, so luxury rentals may cost you extra out of pocket.
- Some credit cards and employer programs offer rental car coverage that may overlap with your insurance, so check before paying twice.
How to add rental coverage to your policy
Contact your insurance agent or log into your policy online and ask to add rental reimbursement coverage. You will choose a daily limit — typically $30, $40, or $50 per day — and your insurer will quote you a price. The cost is usually $10 to $30 per year, depending on your state and the daily limit you pick.
The higher the daily limit you choose, the more you pay in premium, but the less you pay out of pocket if you need a rental. A $50 daily limit costs more than a $30 limit but covers most mid-range rental cars. If you live in an area where rental cars are expensive or you cannot afford to be without a car, a higher limit makes sense.
You can add or remove this coverage at any time, not just when you renew. If you already have a policy, call your agent today if you think you need it — the coverage takes effect immediately or on the date you choose.
What happens when you file a claim and need a rental
After you report a covered loss to your insurer, tell them you need a rental car. They will either direct you to a rental company they work with or tell you to rent from any company and submit the receipt later. Some insurers have preferred rental partners that offer discounts to their customers.
Rent the car and keep your receipt and contract. When your car is repaired and you return the rental, send the receipt to your insurer if they did not pay the rental company directly. They will reimburse you up to your daily limit for each day you had the rental, minus any deductible that applies to your claim.
The coverage ends when your car is fixed and ready to pick up, even if the repair shop is closed and you cannot get it until the next day. Some policies extend coverage for one extra day, but read yours to be sure.
When rental coverage does not apply
Rental reimbursement only covers rentals during the repair period after a covered claim. It does not pay if your car breaks down and you need a rental while it is in the shop for a mechanical problem, because mechanical failure is not a covered event under collision or comprehensive insurance.
It also does not cover rentals for any other reason — if you want a second car for a vacation, or if you lend your car to someone and want a backup, your rental coverage will not pay. The claim itself must be covered by your policy for the rental to be covered.
If your policy has a high deductible — say $1,000 — and your car is damaged but the repair cost is less than your deductible, you do not have a covered claim, so rental coverage does not apply either.
Alternatives if you do not have rental coverage
Some credit cards offer rental car coverage as a cardholder benefit. Check your card's benefits guide or call the card issuer to see if rental coverage is included. If it is, you may not need to pay for insurance rental coverage, though the credit card limit may be lower than what you would buy separately.
Your employer may also offer rental car coverage through a benefits program or employee discount. Ask your HR department whether your company has a partnership with a rental company or an insurance benefit that covers rentals.
If you do not have coverage from any source and you need a rental after a claim, you will pay the full cost yourself. Budget rental companies are usually cheaper than major chains, so compare prices before you book.
How rental coverage interacts with your deductible
Your rental reimbursement coverage is separate from your collision or comprehensive deductible. If you have a $500 deductible and your car is damaged in a covered event, you pay the $500 deductible toward the repair. Your rental coverage then pays for the rental car during the repair period, up to your daily limit.
The deductible does not reduce your rental benefit — you do not pay $500 out of your rental allowance. However, if the repair cost is less than your deductible, you have no covered claim, so rental coverage does not kick in at all.
Frequently Asked Questions
Does my liability insurance cover a rental car?
No. Liability coverage pays for damage you cause to someone else's property or injuries you cause to others. It does not cover damage to your own car or rentals. You need collision or comprehensive coverage, plus rental reimbursement, for the rental to be covered.
Will my rental coverage pay if I rent a car while my car is being serviced?
No. Rental coverage only applies when your car is damaged or stolen by a covered event. Routine maintenance, oil changes, and scheduled service do not trigger coverage. You would pay for a rental out of pocket in that situation.
What if the repair takes longer than my daily limit allows?
Your insurer will pay up to your total limit per claim, not just your daily limit. If your daily limit is $40 and the repair takes 30 days, your insurer pays up to $1,200 total (or whatever your policy's total limit is), not $40 per day forever. Check your policy documents for the total limit.
Can I rent a luxury car and have insurance pay for it?
Your insurer will only pay up to your daily limit, regardless of what car you rent. If your limit is $40 per day and you rent a $150-per-day luxury car, you pay the extra $110 per day yourself. Rental coverage is meant to cover a basic replacement vehicle, not an upgrade.
Do I need rental coverage if I have an older car?
Rental coverage is useful for any car you depend on, regardless of age. If your older car is damaged and you cannot afford to rent a replacement while it is repaired, coverage protects you. If you have savings to cover a rental or you can borrow a car from family, you may not need it.