Properly insuring a rental car can be confusing. So how do you determine whether or not you should purchase the coverage offered by the rental car company? Most importantly, you must educate yourself in order to make the decision that is right for you. Know what’s covered by those seemingly steep fees so you can make an informed decision when you step up to the rental car counter. Avoid the costly mistakes of either wasting money purchasing unnecessary coverage or having dangerous gaps in coverage. Before renting a vehicle, you should make two phone calls-one to your insurance agent and the other to the credit card company you will be using to pay for the rental car.
To help you become an informed insurance consumer, let’s start with a few of the many unknown facts:
Loss valuation: Most personal auto policies (PAP) don’t cover reimbursement for the full value of a car, which many rental car agreements require. Without purchasing the rental car company’s collision damage waiver/loss damage waiver (CDW/LDW), you could end up with coverage of the actual cash value or repair costs (the lesser of the two wins out), which–more often than not will not reimburse the rental car company for the full value.
Diminution of value: For third-party claims, your policy could cover claims of diminished value under the “expenses for which you become legally responsible” clause. However, there is a cap on the payout, and many states have approved an endorsement which excludes claims of diminished value. This means you could be caught legally responsible for paying the difference between the reimbursement by your insurance carrier and the vehicle’s decrease in value to the rental car company.
Use of vehicles: While many auto policies don’t cover physical damage of certain non-owned vehicles–including vans and pick-up trucks–used for business purposes, the CDW/LDW doesn’t carry those exclusions.
Coverage area: The ISO Personal Auto Policy (PAP) doesn’t cover an insured when traveling beyond the United States, Puerto Rico or Canada.
Types of vehicles: Physical damage coverage for motorcycles, pick-up trucks, vans, motor homes and other non-autos isn’t normally covered under the PAP for rented vehicles.
Loss settlement: Certain Personal Auto Policy editions stipulate that an insurance company has an opportunity to appraise the vehicle before it is repaired. If an ambitious rental company makes immediate repairs, the insured may lose coverage by default.
Indirect losses: The rental car company will probably hold the driver responsible for its loss of rental income. Certain PAP editions only cover loss of income for a theft; others have daily and maximum indirect-loss caps.
Administrative expenses: The PAP usually doesn’t cover loss-related fees for appraisal, storage, towing, etc. Rental car companies are known to tack on exorbitant expenses and lump them under “administrative expenses.”
Credit Card Company: Insurance benefits offered by credit card companies differ by both the company and/or the bank that issues the card, as well as by the level of credit card used. For instance, a platinum card may offer more insurance coverage than a gold card.
Credit cards usually cover only damage to or loss of the rented vehicle, not for other cars, personal belongings or the property of others. There may be no personal liability coverage for bodily injury or death claims. Some credit card companies will provide coverage for towing, but many may not provide for diminished value or administrative fees. Some credit card companies have changed their policies, too, so you may not have as much coverage as you thought.
To know exactly what type of insurance you have, call the toll-free number on the back of the card you will be using to rent the car. If you are depending on a credit card for insurance protection, ask the credit card company or bank to send you their coverage information in writing. In most cases, credit card benefits are secondary to either your personal insurance protection or the insurance offered by the rental car company.
If you have more than one credit card, consider calling each one to see which offers the best insurance protection.
Be an educated insurance consumer, do your homework and then weigh the risks and benefits. The extra $20 per day doesn’t seem nearly as ugly when compared to hefty expenses from coverage gaps.
Want to learn more about rental car coverage? Call our agency today and ask to speak with one of our insurance specialists! (410) 504-1002