Transportation expense or rental reimbursement coverages and limits in auto insurance

17.02.2021
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Introduction

In other blogs, we have already discussed the commercial auto insurance policy. An auto insurance policy is a coverage policy that protects a person or a business against loss arising from the destruction of or damage to the insured motor. In simple words, it can be said that insurance coverage is the financial support to the policyholder if any kind of damage mentioned in the policy happens to the policyholder. Some insurance coverages like liability coverage are obligatory, while other coverages may be optional in a state.

Car insurance or auto insurance is mandatory by law in all states. There is a legal requirement to have a minimal level of insurance before driving a car in any country. Coverage may differ by-product; however, the following is a list of possible auto insurance coverages:

  • Bodily injury liability- It helps to pay for the medical bills, lost income, and emergency aid of a third-person in an accident.
  • Property damage liability- It covers the property damages of third parties(eg. car or fence etc.).
  • Medical payments- This coverage helps to pay the medical bills associated with the injuries of passengers, family, and friends who are injured in an accident in insured vehicles.
  • Uninsured and underinsured motorist coverage- This coverage helps to cover the damages of the insured in the case of an accident when the other driver has no insurance or insufficient insurance.

In addition to these basic coverages, a person can also add Transportation expenses or rental reimbursement coverages in an insurance policy. Here we will discuss this optional coverage of an auto insurance policy.

What are transportation expenses or rental reimbursement coverages?

Transportation Expenses are often known as rental reimbursement coverages in the insurance industry. It helps an insured to cover additional amounts incurred for the cost of renting an auto in the event of covered damage to the covered auto. This insurance coverage is optional and available for both personal auto policy(PAP) as well as commercial auto policy.

For instance, if an insured has rental reimbursement coverage in the insurance policy and he/she is in a car accident, that is typically considered a covered loss, the rental reimbursement coverage may help him/her to pay for transportation expenses while the vehicle is in the repair shop after the collision.

Rental reimbursement coverage or transportation expense is only supported while the automobile is being repaired after an accident, not for regular maintenance or leisure. So, if the car of an insured is at the body shop after an accident, rental car coverage is covered up to the limit mentioned in the policy. But if the car is undergoing routine maintenance that will keep it in the shop overnight or the individual is renting a vehicle for a family road trip, then rental reimbursement coverage would not apply.

Rental Reimbursement Coverage Limits

Like other forms of insurance, rental reimbursement coverage is subjected to limits. It means there is a maximum amount that the insurer has to pay for a covered claim. Similar to most insurance policies, there is a daily limit for Rental reimbursement coverage. A maximum number of days is also mentioned in the policy for which it can be used.

For example, the coverage of an insured provides up to $30 per day for a maximum of 30 days until the damaged car is usable again. If the rental car that is chosen by the insured person costs more or if the number of days required is longer, the insured has to pay out of pocket for the costs that exceed the limits. An individual must read the insurance policy and its limits so he/she knows the limits of his/her rental reimbursement coverage before he/she needs to use it.

Bear in mind that certain expenses may not be covered by the rental reimbursement coverage policy. For example, the cost of gas or fuel is typically excluded from rental reimbursement coverage.

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