With summer in full swing, many of us will be renting a car for that perfect family vacation or an extended road trip. There are lots of reasons to rent a car: keeping the miles low on our personal vehicles; having a more reliable car than we own; flying across country; and even simply renting a truck for a weekend project we’re doing around the house. And let’s not forget, sometimes we simply have a rental car courtesy of our car insurance policy after our own automobile has been damaged in a crash. No matter why we have a rental car, it’s important to remember that one of the basic needs we should ensure is met is having sufficient coverage on the car. It isn’t that different than your own car – being uninsured or underinsured can have devistating financial consequences. When you rent a car, the rental agent will likely go over a number of different forms in addition to the rental contract. These are to go over your various options in terms of coverage that the rental company provides. You can either waive the options presented, or accept them. Most rental companies do not require a renter to purchase the options they offer. While those options are important, first we’ll look at three other places you might have insurance coverage from: the company you use for your personal auto policy, the credit card company you used to pay for your rental car, and third party providers of travel-based temporary insurance products. Personal Auto Policy Coverage of Rental Cars While liability insurance is a minimum coverage, there are two other optional coverages you might have: collision and comprehensive. Almost every auto policy (unless it is excluded in your policy, which is rare) will cover you when you’re driving a rental car. Here is how the three basic coverages would apply to a rental car:
- Liability insurance pays for both injury and property damages you cause to others, up to the limits of your policy.
- Collision coverage will pay for damages you cause, minus the deductible.
- Comprehensive coverage will pay for acts of God, fires, theft and many other situations, minus the deductible.
It’s quite possible these will be sufficient to cover most losses, but it’s a wise idea to discuss this with your agent or car insurance company beforehand. This will let you know if you do have sufficient coverage in the event of a crash involving a rental car. Credit Card Companies Some credit card companies (as well as car insurance companies) offer potential discounts on rental cars. And many credit card companies go much further, by providing complementary rental car insurance if you’ve used their card to pay for the rental. However, there are limits to this coverage, including prohibitions on rental coverage in specific countries. And even if they don’t provide complementary coverage, the credit card issuer may offer low-cost options for insurance. It’s important that you discuss the details of coverage and what optional coverages that are available for purchase before you rent the car. The issuer of your credit card should be able to provide you with details on what is and what is not covered, in writing, before you agree to purchase any optional coverages. Other Third Party Providers There are a wealth of travel-based insurance products, often provided by travel agents or travel websites. They’re usually very affordable, in the range of ten or so dollars per day, but it’s important to buy a product you need and not jumping to purchase anything offered without knowing what advantages it would provide you. Request to be given the complete terms of such coverage in writing, including details on what and what is not covered. You’ll also need to know how to file a claim before agreeing to buy these products as well. Once you have these terms in writing, you should be able to determine if the coverage is right for your situation. Car Rental Companies We know how overwhelming the variety of products that are offered by car rental companies can be. The rental agent will use terms and language that can seem confusing. But some of these products may be worth purchasing, especially if you don’t already have sufficient coverage through another source. You’ll be offered a product called either a Collision Damage Waiver (CDW) or a Loss Damage Waiver (LDW). These aren’t true insurance products, but rather, products that pass financial responsibility for the car to the rental company in the event of damage or theft of the rental car. They usually cover all of the potential costs associated with a rental car, such as loss of revenue to the car rental company if the car is damaged or totaled and they relieve a renter of any further financial responsibilities to the company. There are normally significant terms and qualifiers to these products, and they can become void and unenforceable if you are violating any of these terms when an accident occurs. Such terms include things like driving under the influence of alcohol or having a driver not under the rental agreement behind the wheel. If you do purchase this, we say avoid other products, such as “personal accident” and “personal effects” coverage that may be offered by the rental company. Both of these are likely covered through your own auto insurance policy and homeowners/renters policies. Don’t sweat the small stuff. Just make sure you’re adequately covered, and you’ll be in the perfect position to know if you can save your money and waive coverage options offered by the rental companies, or if you should go ahead and pay for them for your own piece of mind.