Do You Really Need That Extra Insurance On Your Rental Car?
Posted by LPL Risk Management on
Perhaps you are planning a warm weather family vacation? Or maybe you are taking a road trip? Regardless of why you need to rent a vehicle, there is important information regarding the optional insurance coverage that you need to know about.
It is a common misconception that your collision coverage on your personal auto policy will protect you in the event of an accident with your rental car. Additionally, credit card companies often advocate protection. The problem is rental car companies think insurance agencies should pay for more damages than they do and credit-card companies want the rental car companies to provide more information. Credit card companies will only pay so much, and often to get them pay for fees due to rented vehicles is quite a hassle. Therefore, in the end often the person who rented the car gets stuck with the bill.
According to the Insurance Information Institute the extra insurance rental companies sell cost approximately $18 – $33 extra a day. When deciding whether to take the extra insurance it is important to weigh your options. First, you should consider the insurance you already have. Many policies cover rental cars, but read the fine print on your policy and call you agency before you hit the road.
If you do not have collision or comprehensive coverage on your personal policy, you will not have it on your rental policy either. You will also still have to pay a deductible; if your deductible is high, it will most likely be worth it to take the extra rental car insurance.
Often, rental companies charge for extra fees that your regular policy will not cover – for loss of use of the vehicle while it is being repaired, depreciation, “administrative” costs, etc. Also, look for something called “diminution of value” which protects rental companies from losing money on badly beat up cars. Diminution of value fees make renters liable for a certain percentage of all damages after a specified amount. Therefore, if you severely damage or total a car you could end up owing thousands and thousands of dollars in damages.
There are so many loopholes in not taking the extra insurance that rental car companies offer that can end up costing you more money. If someone else will be driving the vehicle that is not on your auto insurance policy, they will not be covered on your rental. If you are renting a vehicle outside the United States, your policy may not cover your rental at all. Many companies limit coverage for long-term rentals or do not cover you if you are on a business trip. If you get into an accident with a rental, it can ultimately raise the cost of your personal auto insurance policy.
Because of regulatory differences between states and individual corporations, every policy and credit card offers different levels of collision, repair, loss and liability protection. It’s up to you know what your exposure is and what you can afford.