If you rely on a car, van or truck to operate your small business, you might consider adding rental reimbursement coverage to your commercial auto insurance policy. Rental car reimbursement insurance pays for a loaner car while your vehicle goes through repairs following a covered claim.

So if a herd of hungry, hungry hippos bashes into your bakery’s delivery van looking for their next meal, you can be up and running with a rental vehicle in no time. OK, the likelihood of a hippo encounter aside, it’s important to understand why you may need rental car reimbursement coverage.

What is rental reimbursement coverage?

Simply put, rental reimbursement insurance pays for alternate transportation if your car is damaged in a covered peril and needs to spend some time in the shop. You can also use it if your car gets stolen. To buy rental coverage, though, you need to have an existing full coverage policy with collision and comprehensive insurance.

Here’s an example of how rental reimbursement coverage works.

Let’s say you own a landscaping business, and on the way to your first home of the day, you hit a deer. Thankfully, the animal runs away unharmed, but your truck doesn’t fare as well. The mechanic needs to keep the vehicle for a week to fix the windshield and busted bumper. In this case, your comprehensive insurance would pay for the repairs, and your rental coverage would pay for a loaner truck, so you could continue to see clients and bring your equipment with you.

Rental coverage is offered as an optional endorsement, meaning it’s an add-on to your existing personal auto or commercial auto policy for an extra cost. Typically, rental reimbursement coverage is not a standalone policy, but it depends on your insurance provider.

What does rental reimbursement coverage include?

Rental reimbursement insurance covers the cost of alternate transportation while your vehicle is in the shop after a qualifying incident, like a collision, a natural disaster or even a tree falling on your car.

If you don’t need your own set of wheels, you can also get reimbursed for the cost of bus fare, a train ticket or even a rideshare ride.

What does rental reimbursement insurance not cover?

Having rental coverage attached to your personal auto or commercial auto policy can help you avoid a significant expense while your car is out of commission. However, rental reimbursement coverage only kicks in after a covered claim.

Here are some things that rental reimbursement insurance won’t cover:

  • Loaner cars during routine maintenance
  • Renting a car on vacation
  • Gas for your rental car
  • Rental car damage waiver or deposit

Why do you need rental reimbursement coverage?

Rental reimbursement coverage is always optional, so you don’t need this insurance. It’s not a state legal requirement, like liability insurance. That said, having rental reimbursement coverage can be a lifesaver if you face an unexpected claim.

If you get hit by another driver, their insurance company pays for your vehicle’s repairs and your rental car. But if you cause an accident and your vehicle is damaged, you only get compensated for a loaner car if you have collision insurance and rental reimbursement coverage. Without it, you either have to temporarily live without a vehicle or pay for alternate transportation yourself.

Ultimately, rental reimbursement coverage is there to provide some extra peace of mind and help you save money if something happens to your vehicle. It’s an additional layer of protection on top of your standard auto insurance policy. Plus, it can help you avoid business interruptions if you rely on a vehicle to see clients or drive to jobs.

What does rental reimbursement coverage cost?

Rental car reimbursement coverage is typically pretty inexpensive — think a few extra dollars per month. It won’t significantly increase your existing premium. However, rental reimbursement coverage costs depend on a few unique factors, like your insurance company, your state, and the coverage limit and deductible (if one is required).

Here are some essential details about coverage limits and deductibles for rental reimbursement coverage.

How limits on rental reimbursement coverage work

Rental reimbursement insurance doesn’t provide unlimited coverage. There’s usually a daily limit and a maximum claim limit. That means you shouldn’t expect to rent a brand-new limo while your decade-old sedan is getting fixed.

Also, some insurance carriers cap the number of days that you can use the coverage. If you reach your rental coverage policy limit before your car is out of the shop, your coverage runs out, and you have to pay the rest out-of-pocket. Or take up hitchhiking. (Just kidding. Don’t do that.)

You get to choose your coverage limit when you purchase the policy. The higher your policy limit is, the more expensive your premium will be.

How deductibles on rental reimbursement coverage work

When you file a collision or comprehensive insurance claim, you’re required to pay a deductible. It’s an out-of-pocket cost that gets deducted from your total payout. For example, say you run into a mailbox and have $1,000 worth of damage to the front end of your car. If your comprehensive insurance deductible is $500, you will receive $500 from your insurance company to cover the repair.

However, rental reimbursement coverage usually doesn’t have a deductible. Your insurance company pays for your alternate transportation, up to the daily limit, maximum claim limit or the total number of days you are covered. Within the plan’s parameters, you aren’t required to pay anything toward your rental car.

So, that begs the question, is rental coverage worth the cost? It depends on your personal needs and how you operate your small business.

Having rental reimbursement coverage is valuable if you rely on a business-owned vehicle to visit customers or drive to gigs. The cost of a rental car can add up quickly, and if your vehicle requires multiple weeks in the shop, not having a car can also be a major headache.

On the other hand, you might not need rental car reimbursement if you can live without your work vehicle for some time or have a personal vehicle that can be used in the interim to keep the business running smoothly.

Supercharge your business insurance

Having rental reimbursement coverage can be a huge lifesaver in an accident or any situation that requires a visit to your local auto body shop. It will prevent you from reaching into your pocket to pay for a loaner car while your work wheels are getting fixed.

If you have a business-owned vehicle essential to your daily business operations, consider getting full-coverage commercial auto insurance and add rental reimbursement coverage to your policy.

Commercial auto insurance is just one aspect of insurance that businesses need. To rev up your small business insurance, click “get a quote” or download the Thimble mobile app, answer a few questions and review your quote. Once you purchase the policy, you’ll get your Certificate of Insurance (COI) immediately in your app and inbox. That’s insurance made simple!

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