When my wife and I went on vacation to Florida several years ago, before I became an insurance agent, we rented a car so we could visit Everglades National Park. I remember getting to the car rental counter and the only thing on my mind was if we could get a convertible within the “Midsize” rental category. After the rental car employee told me we were going to be cruising in a Kia Sophia for the next few days, he asked me a question I had not even thought about, “Would you like to buy the rental car insurance?” Since I had a long line of people behind me, I somewhat panicked and declined the auto insurance assuming everything would be covered by my own auto insurance.
As we enter the summer vacation months, many families will be renting cars and unexpectedly dealing with the same rental car insurance question as I did a few years ago. Faced with a number of choices, families will either purchase all the coverage or they will decline the insurance without knowing if they are covered by other policies. This can lead to either wasting money by purchasing coverage you already have or leave you dangerously uninsured or underinsured.
Homework Before the Rental Car Counter
The first thing you should do if are planning to rent a car is call your insurance agent before getting to the rental counter. In most cases, whatever coverage and deductibles you have on your own car would apply when you rent a car, assuming you are renting car for pleasure and not for business. This means if have comprehensive and collision coverage on your vehicle, the rental car will likely also be covered if it is stolen or damaged in an accident.
Another potential source of existing insurance coverage for rental cars is your credit card. To find out what type and how much coverage a credit card company offers call the 800 number on the back of the card. The Insurance Information Institute (III) recommends, “If you are depending on a credit card for insurance protection, ask the card company or bank to send you their coverage information in writing. In most instances, credit card benefits are secondary to either your personal insurance protection or the insurance offered by the rental car company.”
At the Rental Car Counter
Contacting your agent prior to getting to the counter is going to make reviewing these common rental car insurance coverages much easier and avoid the panic and uniformed decision I made when trying to get that convertible.
1. Loss Damage Waiver (LDW) or Collision Damage Waiver (CDW): This is the rental company’s version of comprehensive and collision coverage insurance. If you do not have comprehensive or collision on your own vehicle this coverage is recommended in case the car is vandalized, stolen or damaged. But be careful. According to III, your coverage may become void if the accident was caused because you were speeding, driving under the influence or some other reckless error on your part.
However, you may still want to buy this coverage even if you have comprehensive and collision on your own vehicle. Yes, there is some double coverage by doing this but a rental car company may charge for something called “loss of use”. Let’s say you get into an accident with your rental car and it causes $5000 of damage to the rental car. Since you have collision coverage on your own car your insurance pays the $5000 damage minus your deductible. Then the rental car company sends you a bill because they cannot rent the car to someone else (loss or use) for 2 weeks. Your car insurance company may not pay this expense and you could be left picking up this expense unless you purchased this waiver. If you have comprehensive and collision on your vehicle ask your agent if your policy covers “loss of use” and find out from the rental company if they would charge for “loss of use” to determine if buying this option makes sense.
2. Liability Insurance: Rental companies are required by law to make sure all rented cars have at least the state required amount of liability insurance. If you do not have any auto insurance you will be required to buy this coverage. Remember that state minimums do not offer much protection and it is recommended to buy additional liability insurance above the state minimums.
If you already have auto insurance rental car company will ask you to purchase additional liability insurance. According to III, “You should probably only forgo the additional liability protection if you have adequate amounts of liability protection on your own car.” If you are interested in additional liability insurance it may be a better option to talk to your agent about an umbrella liability policy versus getting through the rental car company.
3. Personal Accident Insurance: This offers you and your passengers coverage for medical and ambulance bills for injuries caused in a car crash. According to III, “If you have adequate health insurance or are covered by personal injury protection under your own car insurance, you may not need this additional insurance.”
4. Personal Effects Coverage: This provides coverage for stolen items in your car while on vacation. If you have a home or renters insurance policy, you are already covered for theft of your belongings away from home, minus the deductible. However, the amount of coverage away from home could be limited so tell your insurance agent if you are planning to take valuable items on the road.
In hind sight, the coverage I had on my own auto and renter insurance for our Everglades trip probably would have been adequate even if something did happen after I declined the car rental insurance coverage. However, I would not of known it was adequate after it was too late and that is never the time to hope you have the right insurance. Take 5 minutes call your agent, be prepared and happy renting!