If you travel often for business or leisure, chances are you purchase a rental car from time to time. Of course, getting behind the wheel of a vehicle that is not your own means you are assuming some degree of risk for that car. Since you have assets and income to protect, purchasing the rental car insurance offered by the car company might seem like a no-brainer. While it is true that this coverage might protect you from financial liability for damages to your rented vehicle, it is important that you fully understand how rental car insurance works before signing on the dotted line.
What is Rental Car Insurance?
Rental car companies sell waivers called collision damage waivers or loss damage waivers. These waivers are not technically insurance, since rental companies are not licensed or regulated for the sale of insurance. However, the coverage offered in these waivers is very similar to the comprehensive and collision coverage in your personal auto insurance policy. Generally, the waiver states that you will not be held financially responsible for any damages to your rented vehicle while it is in your possession. Instead, the rental company will assume all losses, including the loss of use and any administrative costs. There are no deductibles to pay, and your personal coverage will not be affected by a rental car claim against a collision damage waiver.
Who Needs Rental Car Insurance?
As beneficial as rental car insurance can be, not everyone needs it. You should purchase this coverage if:
- You do not have collision and comprehensive coverage on your personal insurance policy
- You are concerned about the consequences of filing a claim against your personal coverage
- You want guaranteed exemption from all financial responsibility pertaining to covered damages to a rented vehicle
The chances are that you already have coverage against damages to your rental vehicle included in the comprehensive and collision coverage on your personal policy. You may still be responsible for paying a deductible, but even that could be offset by secondary rental car coverage offered by your credit card company.
Purchase Coverage or Not, Here’s What You Should Know…
If you decide to purchase coverage because it makes sense for your personal situation, make sure you understand the details of your contract. Every rental company has its own terms and conditions, and many of them include exclusions that could void your coverage. Imagine believing your loss damage waiver covered you for a stolen vehicle only to find out you are actually liable because you accidentally left the ignition key in the car.
Similarly, if you decide against extra rental car coverage, remember that you are ultimately taking responsibility for all losses and will be relying on a third-party company to compensate you for the damages. Most rental agreements allow the rental companies to charge you for all damages – perhaps even before your personal insurance company has a chance to settle your claim. That could stick you with a maxed out credit card and interest payments until you are reimbursed. Furthermore, you might be responsible for any of the rental company’s losses that are not covered by your personal insurance. From the loss of use to vehicle replacement costs exceeding the value paid by the insurer, the excess liability could add up quickly. Talk with your independent insurance agent if you have questions about what is covered under your auto insurance and whether your personal policy is adequate to protect you against rental damages.