How to Know Which Insurance to Take on a Rental Car

Step 1   Know the limitations of your own car insurance. When you rent a car, most personal auto insurance companies’ coverage transfers over to the rental vehicle during the time the rental is utilized by you. Call us to discuss your specific situation.

If you allow additional drivers who are NOT on your personal auto policy, you run the risk that if those persons are operating the rental, they, and the damages they cause, will not be covered.

If your policy provides minimum coverage, you may need to compute the value of the loss or damage of a newer vehicle (the rental car) and decide if you need to supplement your coverage. Personal auto policies that extend collision coverage to a rental car may only provide a coverage limit equal to the value of your own vehicle. If the value of your personal vehicle is less than that of the rental vehicle, you could still incur some damage responsibility.

Step 2  Find out if your credit card company provides any kind of protection. Some credit card companies offer rental car insurance coverage if you use their card to pay for the rental.

Ask about the requirements for getting reimbursed. For example, you may not be reimbursed if you don’t notify the credit card company within a certain period of time (e.g. 45 days) after the incident.

Typically, for credit card insurance to work, the rental car has to be paid in full with that credit card, and you must decline the rental company’s collision waiver, and be the primary renter of the car (although additional authorized drivers are also covered).

Step 3  Check if you’re covered under any of the following specific conditions:

On a business trip – Some personal auto policies might not cover rentals on business trips.

Most insurance companies DO NOT cover any automobile use that involves delivery for business purposes of food, materials, supplies, papers or people.

Long-term rentals – Coverage may be limited. Most credit card company plans cover vehicles rented for up to one month.

In a foreign country – Coverage may not apply.

Certain rental vehicles – Some rental vehicles aren’t covered (exotic cars, camper, pickup trucks, etc.)

Step 4   If you are not covered adequately by your own insurance policy and/or the credit card company, then you might want to consider the rental agency’s options – any insurance is better than no insurance. Hindsight is 20/20, and it is always better to pay a nominal amount per day rather than having to pay thousands of dollars over years in a payment plan for property damage, or having liens placed against you for bodily injury damage.

There are a few plans that most states are required by law to offer:

Collision damage waiver (CDW), also known as “optional vehicle protection” or “loss damage waiver” (LDW).  (Highly recommended to take this coverage)

  • Loss damage waiver means that if the car is damaged for any reason, you can just walk away without any liability. This is true even if your own personal auto policy carries over. This gets you out of paying the deductible that you would normally have to pay under your own car insurance policy, unless the waiver itself has a deductible.  Can cost $20 or more per day but shifts liability for collision damage from you to the car rental company.

 

  • This coverage will apply for “loss of use”.  Loss of use is a fee that is charged by the rental company if your rental car is damaged and is sent out for repair. You would be billed a loss-of-use fee for all damages and repair to the rental car as well as a fee for every day that the vehicle was not able to be rented. That can add up! A loss-of-use fee is not covered by personal auto insurance policies.

 

  • If you don’t have collision and comprehensive insurance of your own, it’s generally a good idea to buy a waiver. There are different levels, dictating how much you’re responsible for (none of the damage, damage in excess of $500 or $3000, etc.).

Liability insurance

  • protects for up to $1 million
  • costs between $7 and $14 a day
  • if you already have an insurance policy, you already have this
  • Most states require rental companies to cover a minimum liability at no cost to you. Check to see what those requirements are in your state, and decide if that is sufficient for you.
  • Personal accident insurance
  • covers medical and ambulance bills for anyone in the car
  • costs $1-5 a day
  • you probably don’t need this if you have an existing car insurance policy, or if you (and everyone else in the car) has adequate health insurance coverage
  • Personal effects coverage
  • covers theft of items in vehicle
  • costs $1-4 a day
  • an alternative is to buy a floating policy under home or renters insurance so valuable items are fully protected wherever you go

Personal accident insurance

  • covers medical and ambulance bills for anyone in the car
  • costs $1-5 a day
  • you probably don’t need this if you have an existing car insurance policy, or if you (and everyone else in the car) has adequate health insurance coverage

Personal effects coverage

  • covers theft of items in vehicle
  • costs $1-4 a day
  • Coverage would extend if you already have home or renters insurance

 

And of course, if you have any questions at all regarding your policy, please do not hesitate to contact us.