Will insurance pay for rental car during repairs?

Whether it be due to a car accident or an unexpected repair, when your vehicle is at an auto body repair shop, one of the first questions you may ask is, "Will my insurance company pay for a rental car?" The answer depends on several factors, including the type of auto insurance you have and the nature of the incident itself. For many Canadian drivers, navigating the fine print of their insurance policy can be confusing, especially when

Rental reimbursement coverage, also known as loss of use coverage, makes navigating the aftermath of a collision or other incident a little easier by covering the cost of a rental vehicle or other mode of transportation while your car is out of commission. That said, like all car insurance policies, there are specific conditions to this type of coverage that you need to be aware of, as understanding how this coverage works is essential to avoiding out-of-pocket expenses.

In this guide, we'll be going over what loss of use coverage is, how it works, when it applies, how to file an insurance claim, and more. Stick around for more information.

Types of auto insurance coverage in Canada

To understand whether rental reimbursement coverage is covered, you first need to understand the basic components of auto insurance in Canada. While insurance coverage is mandatory for all Canadian motorists, the types of policies and coverage limits you're legally required to hold are regulated provincially. Here are some of the most common types of car insurance:

Liability car insurance

Third-party liability insurance is mandatory in all provinces. It covers the cost of medical bills, repairs, replacements, legal fees, and other associated expenses that may arise if you cause an accident that leads to bodily injuries or property damage to a third party. It doesn't, however, cover rental cars.

Collision coverage

Collision insurance is an optional coverage that pays for any repairs or replacements your vehicle requires after an accident, regardless of who is at fault. Rental car reimbursement is often available as an add-on when you have collision coverage, but not automatically included.

Comprehensive coverage

Comprehensive insurance is also optional, and it protects vehicles from damage caused by a wide range of non-collision-related incidents. As part of your comprehensive coverage, you must select certain perils to be protected against. Options often include fire, theft, vandalism, falling objects, and collision with an animal. Similar to collision, rental reimbursement coverage can be added to this car insurance policy.

Accident benefits insurance

This is also mandatory. Accident benefits insurance covers the cost of medical and rehabilitation costs that may arise if you, your passengers, or pedestrians are injured in a car accident. It kicks in no matter who is at fault. This auto policy will not cover the cost of a rental vehicle.

Uninsured motorist insurance

Uninsured automobile coverage is the last type of mandatory coverage in Canada. It exists to protect policyholders if they find themselves in an accident with an uninsured or underinsured driver. It can also come in handy if you are the victim of a hit-and-run accident.

As you can see, rental car coverage isn't automatically included in basic auto insurance policies. Rather, it must be added to your plan as an endorsement. This coverage then kicks in when your vehicle is unusable due to a covered claim under your collision or comprehensive policy. Without those coverages, you’re unlikely to qualify for a reimbursement, even if the accident wasn’t your fault.

Common scenarios where rental car reimbursement coverage applies

There are many different scenarios where rental car reimbursement coverage will kick into gear to cover rental cars for you. Let's take a closer look at some common scenarios to give you a better idea of what you can expect:

Accidents with another vehicle

Let's say you're in a collision with another vehicle and there is significant damage to your car. Because you have collision coverage, you'll be able to have your damaged vehicle covered by your insurance company. And, if at the time you purchased your car insurance, you chose to add loss of use coverage to your plan, your provider will then cover rental costs for the duration of your vehicle repairs.

For example, if your car is in the repair shop for 2 weeks following a rear-end accident, you could be eligible for a rental car during that entire time.

Theft or vandalism

Imagine your vehicle's been stolen from your driveway overnight or heavily vandalized while parked in an underground lot. Believe it or not, this scenario is more common than you may think. Between 2020 and 2023, auto theft claims in Canada rose by 27%, that is, 50,000 stolen cars annually.

If you have a comprehensive and rental reimbursement insurance endorsement, your insurance company will cover rental car costs while your vehicle is being recovered or repaired.

Fire or natural disaster

If your vehicle is damaged in a house fire or wildfire, or by falling objects during a storm, comprehensive insurance would also kick into gear to cover repairs. Again, if you have rental car reimbursement, your rental car expenses will be covered by your insurance provider. Otherwise, you could be left covering the costs.

Your car has been hit while parked

Finally, if someone hits your parked car and drives off, you could file a claim. If rental reimbursement is part of your policy, your insurer would typically cover a temporary replacement vehicle.

The key to these different scenarios is that rental car reimbursement is only applicable if the damage or loss occurred as a result of a covered event. If the incident isn’t included in your policy or you lack the right type of coverage, you’ll be paying out of pocket.

How to file a claim with your insurance company under your rental car reimbursement insurance policy

If you've never filed a claim with your insurance company under your rental reimbursement coverage, you may have some questions about how the process works. To ensure you know what to expect, here's a step-by-step of what your experience will look like:

1. Contact your insurance company

First, you will need to get in touch with your insurance provider and explain what happened. Your insurance company will provide you with detailed instructions on what forms to fill out and what information to supply to successfully submit your claim. Nowadays, many insurance companies allow policyholders to file claims online, as well as over the phone and in person.

Most insurers require claims to be submitted within a specific timeframe, usually within 30 to 60 days. However, the sooner the better.

2. Check your rental car reimbursement coverage limit

Nearly all types of insurance coverage have limits. With rental car reimbursement coverage, it is especially important to double-check your limit, as this will determine how much money you can spend on alternative transportation.

Typically, rental car reimbursement policies either cover policyholders up to a specific amount each day or a total amount. However, some companies will cover you for a certain number of days, rather than a dollar amount. For example, a $30 day allowance for 10 days, or $1500 for seven days.

3. Submit the required documents

Most insurance providers will ask you to submit the following documents once your insurance claim has been opened:

• A copy of the police report (if applicable).

• Photos of the damage to your personal vehicle.

• A repair estimate or invoice.

• Your rental agreement and proof of payment if you're paying upfront.

4. Choose a rental car

Once you know your coverage limit, it’s time to shop around for rental cars. Many insurance companies have partnerships with rental car agencies. In some cases, choosing a rental car company that has partnered with your insurer might mean that the insurance company will pay the agency directly for the rental car costs.

If this isn’t the case or you choose to go with a different rental car agency, you should be prepared to pay out of pocket up front and be reimbursed down the line.

5. Get reimbursed

If you do end up paying for your rental car upfront, make sure to submit your receipts from the rental company to your provider. Once your adjuster approves your transportation costs, they'll reimburse you through your direct deposit or a cheque.

How long does rental car coverage last?

Reimbursement coverage is meant to be temporary. Coverage durations and limits can vary between policies and providers, and are typically structured as follows:

• Standard limits: Most coverage options will cap your reimbursement period at 30 days, which gives auto repair shops enough time to fix your regular vehicle.

• Delays and extensions: If your vehicle takes longer to fix due to part shortage

• In the event of delays, you may be eligible for an extension, but you must get your provider’s approval before proceeding.

• Write-offs: If your car is a total loss, your coverage will end once a settlement is reached.

When is rental car coverage not available?

Remember, while loss of use coverage covers you in numerous scenarios, in others, it won't. Understanding what's excluded from this coverage can help you avoid unexpected costs:

• Mechanical breakdown: Rental car reimbursement coverage does not cover vehicles that break down due to a mechanical issue. If your vehicle breaks down unexpectedly, you'd need mechanical breakdown coverage, which is another optional add-on.

• Annual scheduled maintenance: Rental car reimbursement coverage will not pay for you to rent a car while your vehicle is in the shop for basic maintenance. It only covers you if your car is damaged in a collision or non-collision event listed in your policy.

• You don't have loss of use coverage: Remember, rental coverage is an optional coverage that is not automatically included in basic plans. You will need to specifically request loss of use coverage be added to your plan when purchasing insurance from your insurance agent or broker.

• Transportation costs exceed your coverage limits: Remember, all loss of use coverages have policy limits. If you go over these limits when getting a replacement vehicle, you will have to pay the remaining expenses out of your own pocket.

• Non-Listed Drivers: If someone was driving your car at the time of the incident and they were not listed on your policy, your rental reimbursement claim may be denied. Loss of use coverage is often limited to named drivers only.

Alternative transportation options

If you prefer not to drive a rental car while your vehicle is in the shop, there are alternative transportation options you can claim with your insurance company:

• Public transportation: If they prefer to take public transportation, like the bus or subway, while their vehicle is being repaired, they can be reimbursed for the cost of a public transit pass.

• Ride-sharing apps or taxis: Alternatively, if they want to hire taxis or use ride-share services like Uber or Lyft, or a taxi, you can also claim certain costs.

Does rental car reimbursement cover all rental car expenses?

No, not all rental costs will be covered by your provider. For example, if you need to pay for parking or fill up your tank with gas, these additional expenses will be your responsibility to pay. Your rental coverage only applies to the rental vehicle itself. Additionally, if you have a daily spend limit and choose to go over it, you will need to pay the difference out of pocket. Extensions may be allowed, but you will need approval from your insurer beforehand.

Do I need to use a specific rental car company for reimbursement?

No, you can choose your own rental company if you prefer to drive a certain substitute vehicle. Remember, your provider will only cover reasonable costs. So if your own vehicle is a Honda Civic, they won't cover the cost of you renting a luxury vehicle.

Will my insurance cover rental cars if I'm at fault for the car accident?

Yes, even if you were at fault, you will be able to claim reimbursement from your provider, as long as you've opted for this add-on policy beforehand. Otherwise, when you rent a car, you'll have to pay for your own expenses.

How much does rental car coverage cost?

Rental car insurance coverage costs vary and ultimately depend on your provider, your risk level, and the coverage already included in your policy. Typically, it is relatively inexpensive to add to your policy, though if you also need to add comprehensive and/or collision coverage, it might be more expensive.

However, when compared to the cost of renting a car on your own, adding this policy to your standard plan ensures your finances will remain protected long-term.

Contact BrokerLink today

No one wants their vehicle out of commission, especially when they use it to commute daily. Knowing you have coverage options available can give you peace of mind and help you navigate the aftermath of a collision or other insured event with ease.

As the data from Statistics Canada shows us, claims related to theft and non-collision events are on the rise in Canada. With theft claim costs topping $1.5 billion in 2023 alone, it’s more important than ever to understand your policy and what it covers.

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FAQs on rental car reimbursement coverage

Which insurance company offers the best rental car reimbursement coverage?

There is no one insurance company that offers the best rental car reimbursement policy. Since insurance is so personalized, you will need to consider your budget, goals, and current coverage to decide which insurer has the best coverage for you.

Are rental car insurance and rental car reimbursement the same?

No, rental car insurance and rental car reimbursement coverage are completely different, despite the similar sounding name. Where rental car insurance offers protection against damages to those who rent cars, such as while they are on vacation, rental car reimbursement pays for the cost of renting a car if your personal vehicle is damaged and needs to be repaired.

If you have any questions, contact one of our local branches.