Rental Car Insurance:

Should You Buy Rental Car Insurance?

If the preceding story is too familiar, there's hope just ahead!

It doesn't matter if you're a regular car renter or just an occasional traveler who needs to rent a car, you'll likely face these kinds of choices at the car rental counter. Some folks just decline everything. Some folks purchase all of the coverage offered.

But...are you wasting bunches of money on unneeded coverage or leaving yourself dangerously under insured? Before leaving on your trip, I recommend that you make two phone calls - one to your auto insurance company and another to the credit card company you'll be using to pay for the rental car. You'll need to find out if you have automatic coverage for your car rental from each company, and the various terms and conditions for that automatic coverage.Car Rental Insurance

Another phrase is very important: "If there is a loss to a 'non-owned auto', we will provide the broadest coverage applicable to any 'covered auto' in the Declarations." Here's an example of how this would work for you:

You have two vehicles. One is a 2006 Toyota Camry with full coverage. It's worth $24,000. The other is a 1980 Chevy S-10 pickup worth $1,500 that you only use for trips back and forth to the local home improvement store, and you only have liability coverage on the pickup. If you rented a car and it got damaged, your insurance company would provide the full coverage for the rental car, which is the broadest coverage in your policy.Car Rental Insurance

If you normally drive an older car with only liability insurance on it, there will not be any property damage insurance extended to the rental car. In this instance, you should either use the credit card's Collision Damage Waiver or buy the CDW from the car rental company.

Ask your insurance company representative how much coverage you have on your car. Ask if there is a limit of value on your Collision coverage. If there is a limit, and you drive a 7 year old Ford Taurus that's worth $5,500...and you rent a new Cadillac Escalade that's worth $55,000...will your personal auto insurance cover the damage to the higher valued vehicle? REALLY important to know this...you could owe the rental car company tens of thousands of dollars to repair or replace a high value rental vehicle if you're not properly covered.

Find out the limits of liability. Make sure that your limits are higher than the minimum limits required by your state. Limits above $100,000 per person/$300,000 per accident for Bodily Injury, and $100,000 for Property Damage are very inexpensive. Make sure that you limits are no less than that amount...higher would be better.

Find out what collision and comprehensive deductibles you have on your car,because those deductibles will apply when you rent a car and use your own insurance for rental coverage

Make sure that you have Uninsured Motorist and Underinsured Motorist coverage on your personal or business policy. If you are in an accident with an uninsured motorist, and the accident is his fault, recovery will be practically impossible. Likewise with a motorist who is underinsured. Best to have your own coverage protection.

Frequent Questions

A: If you do not own a car, you won't have an automobile policy. You should buy the rental car coverage, both the CDW and liability coverage. Or, you should use your credit card's CDW and buy the optional liability coverage from the rental car company. If you're a frequent car renter, however, you can still buy a "non-owner" liability policy. This solution might save you money over the coverage available through the car rental company.

Q: What happens if my personal property inside the car gets damaged or stolen?

A: Most Collision Damage Waivers provide coverage for theft of the vehicle, but not any personal property stolen or damaged inside the vehicle. Check your homeowners or renter's insurance policy because you may have coverage through them for your stolen or damaged personal property. A deductible will likely apply.

Here's a super important tip: Some people think that, if they purchased the Collision Damage Waiver or used the CDW from their credit card, and the rental car got damaged, they don't have to report it to their own insurance company. They are hoping that because the CDW covers the damage, it won't affect their own insurance policy....and they won't get a rate increase. WRONG!!! Don't be misled into thinking that you can get away without reporting your accident to your own insurance company. In most accidents, more things get damaged than just the rental car. Even if your accident is just you running into a guardrail, whoever owns that guardrail is going to look to you to pay for the damages. Also, other people might have been injured. You could have a large liability exposure, and you might need your personal or business auto policy to cover your loss. Your insurance policy includes legal representation if someone files a lawsuit against you for damages.

If you're going to use your own personal or business auto coverage, decline the Collision Damage Waiver on the car rental contract. (Continued Next Page)