We’ve all been there. Standing in the endless line at the rental car counter thinking, “when he asks me if I want the insurance, just say no.” But, is that the best choice? Do you know enough about your own insurance policy, and what is in the rental car company’s policy to confidently say no? If you make the wrong decision, the consequences could be severe. Let’s examine how your policy would respond, how the insurance company’s policy would respond, and some practical advice.
If you rent a car and decline the lender’s insurance, you should have coverage, depending on how your policy is set up. Each policy has language to extend liability coverage to a rented car. So, if you rent a car and cause an accident, your liability insurance should protect you. What do you do about the damage to the rental car though? If you have both comprehensive and collision, the damage to the rented car should also be covered. Even if you hit a telephone pole and not another person, these coverages should protect the rented vehicle. However, there is one area that the majority of personal auto policies don’t cover – loss of use. If you cause an accident and it takes the rental company 3 weeks to fix the car, they can legally charge you for those 3 weeks at the going rate. So if that car costs $45 a day to rent, you could owe $945 that insurance most likely won’t cover. Not every rental company will do this, but it has become somewhat of a common practice. If someone else hits you and causes the accident, their insurance should pay and you should be just fine.
The rental car company invests large amounts of money into securing nice vehicles for you to drive, so they want to protect their assets. If you buy their rental insurance, you’re buying a pretty nice policy. They usually offer three options. Damage Waiver, Personal Accident Insurance and Personal Effects Coverage, and Supplemental Liability Protection. The damage waiver is just what it sounds like. It negates your responsibility to fix damages to the rental car. Be careful though, as some may be only partial waivers leaving you responsible for part of the repairs. Personal accident insurance and personal effects coverage provide coverage for you, your passengers, and your belongings. It includes an accidental death benefit, accidental medical expenses, and ambulance coverage. It also typically offers coverage for belongings on an excess basis to any existing coverage, such as your homeowners or renters policy. Lastly, supplemental liability protection gives you $1M in third party (other people) liability coverage. So depending on what you select, coverage can be quite broad. One other benefit is that if there is damage to the car but you bought their policy, you can drop off the keys and walk out, no questions asked.
To understand some practical solutions, let’s look at what would happen in the event of a claim. If you decide to forgo the rental company’s insurance and cause an accident, you’ll be responsible for your deductible, any loss of use claims, and any premium increases due to the claim. You’ll also need to work with the rental company to know who to call, and how the damages will be repaired. Depending on your deductible, the going rate for the car, and the increase in your premium, you could pay a large amount, possibly over $1,500 for the accident. So if you rarely rent a car (1 to 2 times a year), getting the rental insurance may not be a bad idea. You pay a little extra upfront/ but could save a lot in the end. On the other hand, if you rent often, (once a month) getting the insurance every time may not be a viable option. It often depends on how risk-averse you are. Are you willing to take the risk of paying for a rental accident to save money upfront? There is no right answer to this. However, know that if you have the right coverages in place, you have the freedom to confidently say no at the rental counter.
If you don’t know how your policy would respond, call me at Capitol Insurance (317-253-1155) to discuss your options.