One of the most common questions we receive is “should I purchase the insurance from the rental car company”? Unfortunately, there’s no simple answer to this, but we’ll try to explain the options and provide education and advice.
Does my existing auto policy cover a rental vehicle?
Yes, with a few exceptions. A rental vehicle is treated as a temporary replacement vehicle for your own car. Your same personal auto insurance limits and deductibles would apply to the rental vehicle. For example, if you have a collision deductible of $500, that same amount would apply if you had an accident with the rental vehicle as if it were your own car. If you hit another vehicle and cause damage to another party, the same liability limits on your personal auto insurance will also apply.
What are the “gotchas” of the car rental contract that would not be covered by any personal auto insurance policy?
Rental companies can hold the renter liable for “diminished value” charges when a rental car is damaged. This represents the reduction in the market value of a vehicle due to its accident. Also, with some types of damage, rental companies simply sell the damaged car for recovery. They then charge the renter the difference between the market value on the day of the rental (“before”) and the amount the car brought to the auction (“after”). Even if your personal insurance covers damage to a car, car rental companies may also charge the renter for the time the vehicle is not rented (loss of use).
What is Loss Damage Waiver (what they try to sell you over the counter)
The upsell that the person at the rental car counter offers you is called Loss Damage Waiver or LDW. It’s not insurance and it’s simply a contract that releases you from liability for certain damages (for a fee of course). With the waiver, the renter will not be responsible for damage to the vehicle. He will not be charged for repairs to the vehicle, for depreciation, for before-after appraisals or for loss of use. The hirer may be released from all liability for damage caused to the vehicle if he has not engaged in any prohibited use. All car rental waivers have a clause voiding the waiver if the renter is using the vehicle improperly at the time of the accident. The downside of Loss Damage Waiver is that the cost can sometimes be as high as the rental car itself.
Wouldn’t I have coverage from my credit card company?
Only certain credit cards provide coverage for a rental car and even then coverage is usually not Primary cover. This means that you will need to use your auto insurance first before claiming anything from the credit card company. This is not a good option and is generally misunderstood. Unless coverage is through a specific program like the one offered by American Express, it’s not a good idea to rely on this credit card benefit.
So should I take the “insurance” option that the person at the counter is trying to sell me?
Our best recommendation is to confirm with your agent that your personal car insurance limits will apply to a rental vehicle (this should be the case with the exceptions we have discussed). Evaluate the cost of loss and damage waiver to see if it’s worth it for you on this trip. If you’re taking a trip across the country, it might be worth not having to worry about submitting a claim to your insurance company if something goes wrong or not worrying about “gotcha’s” in the insurance contract. car rental. that no personal auto insurance policy would cover.
Flury-Hinderks Insurance is an independent insurance agency located in Overland Park and is a trusted advisor to thousands of families in Johnson County. Contact Flury-Hinderks Insurance today for a full insurance review.