If My Car Breaks Down, Will Insurance Cover a Rental?

Only If You Have the Right Coverage in Place

Young woman on cellphone near car with open hood
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Perhaps you need a car while yours is in the shop after a traffic accident. Or maybe you need a rental car to drive while a mechanic repairs your clunking transmission. You might unexpectedly need to rent a car for a number of reasons, but most basic auto insurance policies won’t cover the cost, even after a covered accident. 

However, you can often add rental car reimbursement coverage to an existing auto insurance policy. It won’t cover rental car costs in all circumstances, but it might offer enough of a benefit to be worth the fairly minimal extra cost. We’ll review when your car insurance might cover the cost of renting a car, plus the difference between rental car insurance and rental car reimbursement.

Key Takeaways

  • Rental car insurance is typically offered by rental car agencies and covers the rental car during the term of your rental.
  • Rental car reimbursement coverage is an optional add-on to your car insurance policy that helps pay for a car rental if your vehicle needs repairs after a covered loss.
  • Some mechanical breakdown insurance policies provide a rental car allowance.
  • Your personal auto insurance policy may provide all the protection you need when renting a vehicle, but it’s important to read the fine print.

Rental Car Insurance vs. Rental Car Reimbursement

Rental car insurance and rental car reimbursement coverage might sound similar, but they’re different types of protection. Rental car insurance covers a rented vehicle. For example, if you rent a car while on vacation, you might elect to purchase the rental car insurance offered by the rental agency. Typically, rental car insurance offers several types of protection, including:

  • Liability coverage to cover the cost of losses you cause to another person or their property.
  • Personal accident insurance to pay your medical costs following a covered accident.
  • Personal effects coverage to cover personal belongings stolen from your rental automobile.
  • Loss-damage waiver coverage to cover damage to the rental vehicle.

Rental car reimbursement coverage is an optional coverage you can add to your standard auto insurance policy as an endorsement or rider. If your personal vehicle sustains damage in a covered accident, this coverage pays the costs of renting a car while yours is repaired. 

Rental car reimbursement coverage is usually very affordable. According to some insurers, a full year of coverage could cost less than the cost to rent a car for a single day.

When Does Insurance Cover the Costs of a Rental?

If another driver is at fault for an accident that damages your vehicle, their property damage liability coverage should pay for you to rent a car while yours is in the shop. However, the insurance company may limit the length of time it will pay for the rental. It takes an average of two weeks to repair a vehicle damaged in an accident, according to research from Enterprise. The insurer isn’t required to provide you with a rental vehicle if yours is totaled, but some do as a courtesy. 

If you carry a rental car reimbursement endorsement on your auto insurance policy, it should pay the costs of renting a car after a covered accident. However, this coverage comes with a few caveats:

  • Carriers typically only offer rental car reimbursement endorsements if you purchase collision and comprehensive coverages.
  • Rental car reimbursement coverage has limits. For instance, your coverage may provide $30 per day for up to 30 days. Some providers include both day and claim limits, such as $25 per day up to $750 per claim. If your rental costs exceed those limits, you’ll pay for them yourself.
  • Although rental car reimbursement coverage typically doesn’t have a deductible, you may have to pay the collision or comprehensive deductible for the covered damage.

Mechanical breakdown insurance (MBI) policies sometimes provide an allowance to pay for a rental car when your personal vehicle is in the shop for a covered repair. Some insurers offer MBI as an add-on to standard auto policies, and some credit unions offer the coverage when you take out a loan for an automobile. You can also buy an MBI policy from companies that specialize in this type of auto protection.

When You Have To Pay for a Rental Car Yourself

If your car breaks down and you don’t have mechanical breakdown insurance, you’ll have to foot the bill for a rental car. Likewise, if you’re at fault for an accident, your collision coverage probably won’t cover one. After all, that’s why insurance companies offer rental car reimbursement coverage. And of course, when you’re renting a car while on vacation, you’ll have to cover the costs yourself.

Do I Need To Insure My Rental Car? 

Your personal car insurance policy might extend coverage to a rental car. Standard auto insurance policies offer bodily injury and property damage coverages, which help pay another driver’s medical expenses and vehicle repair costs when you’re at fault for an accident.

Your collision and comprehensive coverages may pay for damages to a rental automobile or pay to replace it if it’s stolen. Your homeowners policy might cover items stolen from a rental car, and your auto policy’s medical payments coverage might provide the same protection as the rental agency’s personal accident insurance. Your credit card might even offer rental car coverage.

Before renting a car, read the fine print on your policies and speak with your agent to learn what your personal auto and home insurance will and won’t cover.

Even if your personal car insurance policy covers a rental vehicle, purchasing insurance at the rental agency desk might make sense. Rental car coverage may have a lower deductible than your personal auto policy—or no deductible at all. If that’s the case, buying rental car insurance may allow you to walk away without additional costs if you have an accident. It can also help you avoid filing a claim against your personal policy and can provide better protection if your car policy only provides state-mandated minimum liability limits.

Frequently Asked Questions (FAQs)

What does rental car insurance cover?

Typically, rental car agencies offer liability, loss damage waiver, personal accident, and personal effects coverages. These coverages generally correspond with the bodily injury liability, property damage liability, collision, comprehensive, medical payments, or personal injury protection coverages of a personal auto insurance policy. Usually, you can choose which rental car insurance coverages you want. 

Which credit cards cover car rental insurance?

Many credit cards offer some level of insurance coverage for rental cars. Before renting a vehicle, check with your credit card company to learn what your card does and doesn’t cover. The level of coverage offered can vary widely by the type of credit card you carry and the bank that issues it. Typically, credit cards only offer secondary coverage, which means the credit card coverage will only kick in after you’ve exhausted the coverage of your personal auto insurance policy or rental car insurance. 

How old do you have to be to drive a rental car?

Age restrictions vary by rental car agency. Some allow drivers as young as 18 to rent a car, while others only rent to people 21 or older. Age restrictions can also vary by state. Some companies require drivers under age 25 to pay a surcharge, which can cost $25 or more per day.

How much car insurance do I need?

State laws mandate minimum levels of bodily injury liability and property damage liability coverages. However, most minimum requirements don’t provide enough coverage to protect your assets. Financial experts often recommend carrying at least $100,000 in bodily injury coverage per person, $300,000 in bodily injury coverage per accident, and $100,000 in property damage coverage per accident. Your state may also require you to carry other types of coverages, such as medical payments, personal injury protection, and uninsured/underinsured motorist coverages. If you finance or lease an automobile, you may also need to purchase collision and comprehensive coverages.