You are actually addressing two different issues. First, the auto insurance does cover the rental if you carry the correct coverages. Second, the rental company said the charge was for their loss of business which has nothing to do with car insurance. It has to do with the car not being available for rent. However, I would question that since they usually have an abundance of cars so having ONE out of service is not an inconvenience. It is just another way companies are trying to find to increase their income and alienate customers. Your anger should be pointed at Budget.