Rental Car Insurance
To Buy or Not to Buy: Rental Car Insurance
“Does My Auto Insurance Policy Cover a Rental Car on Vacation?”
We wish that our answer could be a clear “Yes,” but there are many shades of gray (caused by the fine print in the rental car contract) to consider. The short answer is that we generally advise our clients to buy the rental company’s coverage when on vacation. Here is why:
As a general rule, your auto insurance policy extends to a rental car if:
- You will be driving the rental car in the United States or Canada.
- Everyone who might drive the rental car signed up as a ‘driver’ on the rental agreement. A driver who is not listed on the agreement is not covered.
Keep in mind that your auto insurance policy only covers the drivers that are listed on your auto policy. So if you are traveling and sharing a rental car with a friend, make sure they check to see if they are covered under their own auto insurance policy.
- You are renting a car for short-term use only. Short term generally means less than 28 days.
- You are renting a car for personal use. Your personal auto policy generally does not cover business use. Therefore, if you use the rental car for business purposes, your loss may not be covered.
- You have the necessary coverage on your auto policy. This includes:
- Liability
- Underinsured motorist
- Personal injury protection coverage
- Comprehensive
- Collision coverage
If you dropped comprehensive and collision coverages on your car(s), you do not have coverage for damage to the rental car (such as broken windshield or collision loss).
- You are renting a private passenger automobile. Clients often ask if they need to buy coverage for a moving van. The answer is YES. Your auto liability will extend, but there is no coverage for damage to the rented moving truck because it doesn’t fit the description of “private passenger auto.”
All this sounds like your auto policy might cover you for a rental car, doesn’t it? So why do we recommend that you spend vacation dollars on the rental car company’s insurance?
Because we don’t want your vacation spoiled by delayed travel or a surprise charge to your credit card due to “traps” in the rental car contract!
You have the option to purchase a “Loss Damage Waiver” (LDW) from the rental car company. If purchased, this waiver relieves you from financial liability for the loss of, or damage to, the rental car, parts, and accessories that come with it.
Purchasing an “LDW” is generally a good idea, because:
- If the car you rented gets damaged and needs repairs, the rental car company cannot rent it during the repair process, which can often exceed several weeks. In most cases, the fine print in your rental agreement will stipulate that you owe the rental company for loss of rental income during the repair. Your policy has limited coverage for these charges.
- If you don’t have collision and comprehensive coverage on your auto policy, or if you don’t want the rental car company to charge your credit card for the total cost of the repairs (which they will do – rather than wait for the settlement from your insurance company) you should buy the “LDW.”
- If you don’t want to pay their various administrative or loss related expenses, such as towing, appraisal, claims adjustment, storage, etc. Some of these may not be covered by your own insurance policy.
- If you have comprehensive and collision coverage on your auto policy, buying the “LDW” may sound like buying duplicate coverage. But if you buy it, you may not have to file a claim under your personal auto policy, you won’t have to pay the deductible, and you may not face a rate increase at your next renewal.
- If you decide to buy the “LDW,” be sure to read the fine print. There are likely to be some exclusions:
- Drivers not listed on the contract
- Driving when intoxicated
- Driving off-road
- Or when driving certain stretches of road, such as the infamous road to Hana in Maui.
- Damages to motorcycles, mopeds, motor homes, etc.
Another common question is whether credit cards provide insurance coverage for rental cars.
Our answer? Maybe.
- Some of the premium credit cards (Gold and Platinum, etc.) do offer coverage for a rental car.
- Contracts vary from card to card, so call your credit card company to find out exactly what is covered.
- Some cards may only provide secondary or excess coverage, requiring you to file a claim with your own auto policy before the credit card coverage applies.
Our recommendation is not to rely on insurance coverage through your credit card unless you’ve researched this issue thoroughly.
When you rent a vehicle, ask them for an advance copy of the rental agreement in order to determine your contractual obligations for damage. A few rental car companies post this on their website. Also, be sure to inspect the vehicle for damage, inside and out, before signing anything.
Finally, keep in mind that your personal auto policy will only extend protection in the United States and in Canada. If you plan on renting a car in Europe, Asia, or South America, your personal auto policy will not extend, and is limited at best in the U.S. Territories. In that case, it is best to purchase maximum limits of liability, in addition to collision and comprehensive coverage, directly from the rental car company.
National Rental Car Companies:
© 2008, Mark S. Balcos. The reader assumes all responsibilities for his/her own actions in regards to any items discussed in this report. Adherence to all applicable laws and regulations, federal, state and local, governing the use of any product or service described in this report in the US or any other jurisdiction is the sole responsibility of the reader. The publisher and author assume no responsibility or liability whatsoever on the behalf of the reader of these materials. The reader is encouraged to consult directly with his/her insurance professional.
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