Understanding Insurance Offered By Rental Car Companies
By Tracey Wells
Should you buy the insurance offered by the rental car companies? Whenever you rent a vehicle you know the drill, they ask you if you want their insurance coverage. They ask you when you reserve the vehicle online and as soon as you pick up the vehicle. Sometimes it feels like they are trying to pressure you into the purchase. If you agree to the coverage, it can cost an additional $10-$25 a day on top of the rate you reserved the vehicle for. Some people blow it off without a second thought and many will often call their insurance agent while at the counter at the rental car agency.
Should you purchase the coverage? Well, it depends. Some of the coverage that is offered is redundant to what you have on your personal auto insurance policy. Some car rental companies will bundle all of the coverages and other rental companies will give you la carte options. Let’s break down the coverages the rental car companies will offer:
Liability – Pays up to a limit for injuries and property damage to another party that you are responsible for. The standard auto policy will cover this up to its policy limits.
Personal Accident or Medical – Covers injuries to you and passengers inside the rental vehicle in the event of an accident. If you have medical coverage on your personal auto policy, this would be duplicate coverage.
Personal Effects – Covers the contents in your rental car. Examples include cell phones, laptops, tablets or your shopping bags. If you have a homeowners or renters insurance policy, the belongings in the vehicle are normally covered as an extension from the homeowners/renters policy. Your auto policy does not cover the contents. The downside to having your homeowners/renters insurance policy cover any items damaged or stolen out of the rental vehicle is the deductible that must be met first. The deductible can be between $250 (usually on a renters insurance) and $1,000 (on most homeowners policies).
Collision/Damage Waiver – Covers physical damage to the vehicle that you are responsible for.
How your insurance will response in the event of a claim?
The liability, medical and comprehensive and collision coverage will follow you to a rental vehicle. The only exceptions are if you own a passenger vehicle and you attempt to rent a large truck, you may be required to purchase the collision/damage waiver insurance offered by the rental company.
If you pass on the collision/damage coverage offered by the rental car company and the rental vehicle is damaged, you can still be charged for “loss of use.” Loss of use is calculated by the normal daily rental rate times the number of days the vehicle is out of service while being repaired. Example, if the rental rate was $50 per day and you have an accident in the rental vehicle, your auto policy pays for the repairs, but the vehicle was in the body shop for 8 days, the rental car company can bill you for $400. Your personal auto policy will not cover for the loss of use. However, if you reserve and pay for the rental with an American Express Card, the loss of use will be covered. Some Visa and Mastercard credit cards will cover as well, check with your credit card company to confirm.
It is suggested to take photos and videos of the vehicle prior to turning in the vehicle. This will be the proof of the condition of the vehicle in case the rental car company says you damaged their vehicle. It only takes a few minutes to do with your cell phone.
To sum it up, you should consider the coverages offered, but realize there could be duplicate coverage and the possibility that you could still be charged for “loss of use” even if your personal auto policy pays for damage that you caused to the rental vehicle. Before you pick up the rental vehicle, call your insurance agent for consultation.
Tracey Wells is an Agency Owner for Farmers Insurance in the state of Georgia.