Understanding What Your Policy Covers When You Drive A Rental Car

What You Need to Read Before Renting Your Next Automobile

Understanding What Your Policy Covers When You Drive A Rental Car
December 13, 2013

At the airport car rental counter, we are faced with an array of options for car rental insurance. Tired, distracted and in a rush to get to their final destination, some travelers simply accept everything offered, while others decline every option without considering whether they are really covered. Doing a little homework upfront could save money and possibly avert disaster.

You probably already have the sources of coverage that you need to check.

  • Existing auto policy: Assuming you own a car and have insurance, parts of your policy may extend to rental cars. If your policy only covers liability, you may want to consider paying extra for the collision damage waiver.

  • Homeowner's, renter's or condominium policy: Your existing policy may already cover personal property stolen from your rental car.

  • Existing health insurance: Your policy may cover your medical costs in case of an accident.

  • Credit Cards: Many credit cards offer some coverage if you use their card for the rental. However, most credit card coverage is secondary (after your insurance company limit), and may have limitations and restrictions. Also, credit card coverage typically covers only theft and collision damage, but does not address medical costs, injury, or personal effects. If you do have a card with primary coverage, you will not have to file a claim with your car insurance company, which can ultimately keep your premiums lower.

Check all of these sources to verify what applies in your case. For example, does the coverage apply on an international trip or on a business trip where your employer's coverage may take precedence?

Virtually all car rental companies offer four categories of coverage:

  • Collision Damage Waiver (or Loss-Damage Waiver): Not really insurance, but a waiver of liability transferring financial responsibility for the car from you to the rental car company. It generally covers damage or theft of the rental car, and related fees like towing and loss-of-use charges. It costs from about $10 to $40 per day depending on the rental company, location risk factors, state mandates, and other concerns. Beware: many tired travelers have accepted the "waiver" thinking they are waiving insurance instead of accepting a damage waiver.

  • Supplemental Liability Insurance: Provides protection from lawsuits. Rental car companies are obligated by state mandate to offer minimal liability coverage; supplemental insurance provides extra protection. However, you may already have coverage under your own auto insurance policy. Coverage generally costs from $9 to $16 per day.

  • Personal Accident Insurance: Covers medical costs from accidents for you and your passengers (but not for others who may be injured in an accident). Medical payments may already be covered by your health plan, and personal injury protection may be covered on your auto policy. Should you opt for this coverage, it's fairly economical at about $1 to $5 per day.

  • Personal Effects Protection: Covers what you keep in the car. It is inexpensive at about $1 to $5 per day, but check first to see if your renter’s or homeowner’s insurance includes theft from rental cars.

Rental car companies can have other plans available such as uninsured motorist protection. Check the options with your preferred rental company. There are also third party policies available just covering auto rental, or specialized programs that are available through credit card companies. For example, American Express offers a separate flat rate program with no deductible.

Other considerations:

  • Clear negligence is not covered: Don't leave keys in the car; promptly notify the company if the car is stolen, and take the same precautions as you would with your own automobile.

  • Expect a hard sell: Car rental companies make a significant amount of money selling insurance.

  • Finally, double-check the paperwork before you sign. There are cases of people verbally declining coverage at the counter only to discover after signing that coverage was added.

If you’re too tired to see that what is on the paper differs from what you agreed to, then you’ll have no one to blame but yourself.

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