You are going on vacation and decide to rent a car! One of the most frequent questions we are asked here at Black & Ramer Insurance is “Should I buy the insurance coverage from the rental car company?” In a perfect world where money is not an issue I say, “Buy the coverage!” but Like many times the daily charge for the insurance coverage from the rental car company can be almost as much as the daily rental itself!
So here are a few tips on what most insurance policies cover and where there can be gaps with your personal auto policy.
If you’re renting a vehicle outside the United States and/or Canada most personal insurance policies will not respond. In those cases you need to buy the optional coverage for damage to the rental car, generally called “Collision Damage Waiver” (CDW ) or Loss Damage Waiver (LDW). Some foreign countries provide liability coverage automatically but if it is optional or if the amount provided is minimal be sure you take out additional coverage as well if it is offered. All countries are a little different so be sure to read up on the respective country’s laws you are to visit.
When renting a car, pickup or van in the United States or Canada most policies will pay for damage to a rental car if you carry Comprehensive and Collision on at least one of your vehicles. You would still have to pay your deductible but it would be treated as if you are driving your own vehicle. Sometimes depending on your credit card they may also cover damage to the rental car.
Although your policy and/or your credit card may pay to repair damage to the rental car, rental companies may have other charges that are not covered by your insurance. And here is where it gets tricky!
Some rental car contracts will have some type of diminishing value clause included in the language. For example, and this happened to a real life client here at Black & Ramer Insurance, after the auto policy paid $6,000 to repair a damaged rental car, the rental company sued them for an additional $3,000 to cover the reduction in the car’s value.
Rental companies may also charge you for loss of rental income while the car is being repaired. Your policy doesn’t cover this, though your credit card might. Again, if you do not carry Comprehensive and Collision coverage on at least one of your vehicles, you won’t have any coverage for damaging a rented vehicle.
Some rental car companies also sell personal accident coverage, or something named to that effect, for medical expenses and death caused by a car accident. If you have adequate life and medical coverage this isn’t needed. Another option they may try to sell is personal effects coverage that pays for loss to your luggage and personal property in a car accident. It’s very limited and duplicates coverage provided by your Homeowners policy, I do not recommend buying it.
Finally, if you’ll be renting a vehicle for business reasons, check with your employer to see if they will protect you. If not, we’ll need to know specifically what you’ll be renting since some vehicles, especially pickups and vans, may not be covered when rented for business use.