Do I need to purchase the rental car coverage?
We hear this question often and the answer varies. A good place to start is to review your personal auto insurance policy with a licensed insurance agent. Depending on your policy and carrier, your current coverage may apply to your rental car. Your credit card company may also offer you rental car protection. The real question is do these existing coverages offer enough protection?
Here are 10 reasons why we recommend our clients purchase rental car coverage.
- Value of the Rental Car. Most rental car agreements state that “the value of a rental car is determined solely at the discretion of the rental company and may be significantly different from the market value “ACV” basis used by most auto policies.” In other words, the rental car company has the power to determine what they say the value of the vehicle is and it may be different than the actual cash value of the vehicle. Your personal auto insurance likely only covers the actual cash value, which would make you responsible for any difference left over.
- Appraisal Issue. If there is any damage to the rental car, the rental car company may opt to repair it immediately. This could be an issue if your personal insurance company requires an appraisal prior to covering any damage. Double-check your rental car contract and see if there is any clause relating to damage repair or forgoing an appraisal as the lack of one could result in a denial from your insurance company, resulting in you being responsible for all damage regardless of fault or coverage.
- Loss Payment. Many rental car companies have a policy that allows them to charge the full amount of any damages or losses to the credit card on file. This could result in significant debt or maxing out your credit card limit. By having the rental car coverage, you can limit the risk that you are responsible for a major loss or damage and limit the potential for debt from these charges.
- Loss Damage Waivers. If your rental car agreement includes a Loss Damage Waiver (LDW), you could be responsible for any loss beyond normal wear and tear regardless of fault. This waiver usually requires that a renter’s personal auto insurance have comprehensive and collision coverage as well as liability. However, even with these coverages on your personal policy, you may not have enough coverage. An LDW could leave you responsible for everything from collision damage to damage caused by an unlisted driver such as a valet and everything in between. In some of these cases, your personal auto policy won’t cover these losses and rental car coverage could come into play.
- Loss of Rental Income. In the event that a rental car is taken out of rotation due to being damaged or totaled, you could be responsible for the rental company’s loss of rental income. Your rental agreement may have a set amount for this, or it could be at the discretion of the rental car company, however, it could end up being very expensive. In the event you become responsible for this loss, your personal auto policy likely has caps on how much they will pay out for this, and you would be left to pay any differences.
- Administrative Expenses. Your rental car agreement may state that you are responsible for various “administrative” expenses including but not limited to towing, appraisals, claims adjustments, etc. These expenses are usually not covered under a personal auto policy.
- Responsibility Confusion. In the event of a loss, it can be confusing to determine who is responsible for the associated costs. Is your personal auto insurance company responsible? Are you personally responsible? Is there another source of recovery of costs? Purchasing the rental car coverage clears this confusion up.
- Exclusions. Depending on your personal auto policy or carrier, you may have exclusions to consider. Your policy may not cover rental vehicles or may only cover certain types of vehicles. You also may have exclusions as to locations, such as not having coverage in Canada or Puerto Rico. The rental car coverage could eliminate any issues of the unknown.
- Non-Covered Drivers. Your personal auto policy likely only extends to covered drivers. This creates a large gap when it comes to valet parking, as the valet drivers aren’t usually covered, drivers. Make sure to verify how your policy, be it a personal policy or rental car coverage, works in these situations.
- Future Costs. Purchasing rental car coverage can help you to avoid future costs. In the event of a loss, most rental car coverages won’t have a deductible and won’t cause your personal auto policy premium to increase. This means that purchasing rental car coverage can help you to avoid these costs.
* All rental car coverage policies differ, and it is important to read all documentation and clarify any parts that you are unsure about with the rental car company and their insurance provider.
