Do I Need Rental Car Insurance?
What Does Rental Car Insurance Cover?
It’s a situation that everyone who has rented a car has been in: You already picked out the car you are going to be leaving with and you think you have the final price and then they ask if you would like to take out their insurance on the vehicle for an additional amount. Most people have their answer prepared in advance, “yes, I definitely want the coverage” or “no, I’m not falling for that” but rarely is this truly an informed decision.
What’s Offered and Where Might It Already Be Covered?
It is important to start with a thorough review of your current insurance program so you know what coverages you may already have and what you might want to add. Typically car rental companies will offer the following four different coverage options and here is where to look in your current program for extended coverage:
- Collision Damage Waiver (sometimes called Loss Damage Waiver) – This covers damage to or theft of the rental car (and often minimizes disputes over minor or preexisting damage). Look at your Comprehensive and Collision coverage on your personal auto insurance policy to make sure you have these coverages and confirm how they extend to your rental car as a possible replacement. The deductibles for these coverages will still apply and most rental companies will also make you liable for the loss of use while the vehicle is being repaired and other additional fees which may not be fully covered. The credit card company you are using to pay for the rental car may offer some rental car coverage however you need to discuss this benefit and their specific terms with them directly.
- Liability Insurance – This covers your personal liability while driving the rental car. Look at your Liability coverage on your personal auto insurance policy to make sure this coverage extends for your specific rental car as a possible replacement.
- Personal Accident Insurance – This covers medical bills for you and your passengers injured in the rental car. Look at your personal health insurance (and your passengers’ health insurance) along with the Medical Payments or Personal Injury Protection coverage on your personal auto insurance policy as a possible replacement.
- Personal Effects Coverage – This covers your personal property items within the rental car. Look at the Personal Property coverage on your homeowners or renters insurance for off premise coverage as a possible replacement.
Some Factors that Eliminate Coverage Extensions
There are several factors which can eliminate the above coverage extensions and make the rental company’s coverage your best option which is all the more reason to contact your insurance partner on your specific rental before waiving the rental company’s coverage. For example, personal auto insurance policies typically have built in coverage territories which eliminate coverage extensions for most international rentals and time limitations which may eliminate coverage for long term rentals. There also may be issues if the rental is for business, if the rental is a moving truck, or if the rental is an exotic vehicle that is not comparable to your personal vehicle. Also, all drivers of the vehicle must be on the rental contract and often their specific coverages will transfer which could present problems if they are rated on a car without Comprehensive and Collision coverage even though a different car on the same policy has those coverages.
What Should You Choose?
This personal choice comes down to fully understanding your specific exposures, your options, and your personal risk appetite. The safest choice is to always take the rental company’s coverage. However, after you confirm your coverage extensions you can make an informed decision about whether or not you are comfortable waiving the rental company’s coverage options and substantially lowering the cost of your rental.