Rental car insurance can provide peace of mind. While many people have strong opinions about whether to purchase or decline a collision damage waiver, few people fully understand how the coverage offered at the rental counter actually works. Continue reading to better understand what is actually in the rental coverage agreement and find out if this added coverage could be right for you.
How Rental Car Insurance Works
Rental car insurance is a term used to describe the loss damage waiver sold by rental companies. While not technically insurance, it works in a very similar way. By paying a premium and signing an agreement, the rental company agrees that it will not seek you for damages to a rented vehicle so long as you maintain the integrity of the contract. If something were to happen – say a tree falls on your rental car, or you hit a deer driving down the highway – the rental company would take care of all losses instead of seeking compensation from you.
Rental companies make a profit when you purchase the collision damage waiver because they know it is unlikely you will need to use the coverage. Even if you do return a damaged vehicle, the collision damage waiver might not apply to losses if the circumstances surrounding the accident were in violation of the guidelines within the waiver agreement. Every rental company is different, but examples of common restrictions might include voided coverage for reckless driving or letting an unauthorized driver operate the vehicle.
For example, imagine you are driving home one rainy night and lose control of your vehicle. Although it was raining, a police report states that speed was a factor in the accident. The vehicle is towed away, and you submit a claim against your collision damage waiver. Unfortunately, the rental company still plans to hold you accountable for the loss since speeding can be interpreted as reckless behavior. While not likely, it could happen.
It Could be a Waste of Money if You Already Have Coverage
As beneficial as a collision damage waiver can be, it could also be a waste of money if you already have all the coverage you need. Before renting a vehicle, check with your independent agent to find out if your collision and comprehensive coverage will follow you while you drive a rental car. You might have to pay a deductible, but chances are your insurer will pay most of the damages when you file a claim.
Keep in mind that many credit card companies also provide an added layer of rental car protection at no added cost, and you may be able to combine it with your personal auto coverage to minimize your out of pocket costs. Often, the rental car damage protection on your credit card will pick up where your insurer leaves off. Some may even provide primary coverage that prevents you from filing a claim on your personal insurance policy at all. Just be sure to find out the details of your credit card rental coverage beforehand. Most card companies require that you pay for the rental with the card and also decline the collision damage waiver when it is offered to you.
With all of that said, you will still have exposures that you might not have thought of. For example, a rental car company could hold you liable for the loss of use of the rental vehicle from the time of the accident until it is replaced or repaired. This could end up costing thousands of dollars. Another consideration is that your personal car insurance will only cover the rental vehicle for its actual cash value, not nearly enough to replace it in many cases.
As you can see, it might not seem to be the best deal on the surface, but at the same time, an extra few dollars a day may just save you a lot of worry and frustration in the long run.
If you have questions about rental car coverage or any other type of insurance, feel free to call Heinen & Associates.