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Rental Car Insurance: Everything You Need to Know

A car accident may be the furthest thing from your mind when you’re researching rental cars. But the rental car agent will most certainly bring it up when you pick up your vehicle. That’s because they’ll offer you additional insurance coverage. Do you know what coverage to accept and what to turn down?

It’s so important to research and find out what your own insurance and credit card cover way before you reach the rental car counter. Otherwise, if you do get into a car accident with your rental, you could be looking at some major problems.

Keep in mind, this information applies only to passenger vehicles rented in the United States from traditional car rental companies. If you are renting a car for business purposes, odds are that your personal auto insurance will not cover your rental.

Rental Car Agent

First, let’s look at the five most common rental car company coverage choices:

  • Loss/Collision Damage Waiver – The rental car company won’t charge you if the vehicle is damaged or stolen. This also covers what’s deemed “loss of use charges” if the car has to go into a shop to be repaired, causing it to be out of the rental car company’s fleet for any period of time.
  • Liability Coverage – Protects you if you injure someone or damage property due to a car accident.
  • Personal Accident Insurance – Covers medical bills for the driver and any passengers in the rental vehicle. Sometimes ambulance expenses are covered as well.
  • Personal Effects Coverage – Coverage for personal belongings stolen or damaged while in the rental.
  • Roadside Assistance – Most rental car companies offer roadside assistance– at a fee. This protects you from additional charges for problems that may arise, such as running out of gas, lost keys or a dead battery. Note, flat tire services are not always covered or may only be offered separately, adding on yet another fee.

Rental car agents often employ scare tactics when they offer you additional insurance coverage. That’s because they’re not service employees, they’re salespeople. You might be surprised to learn that they make commissions on every extra they can tack onto to your rental car bill, hence the hard sell.

It’s so important to research and find out what your own insurance and credit card cover way before you reach the rental car counter.

Are any of the car rental company’s added coverages worth buying?

A lot will depend on your individual circumstances. You certainly don’t want to waste money and pay for the same coverage twice, but you don’t want to be on the hook for thousands of dollars in bills either. There are some situations where the choice is more obvious.

YES:

You currently don’t have car insurance – You must have some sort of insurance before you get behind the wheel. If you have homeowner’s, renter’s or health insurance, check to see if and what rental car coverage they offer. If they don’t cover your rental, check with your credit card company. If they only offer secondary coverage, which is more common, you’ll need to take at least part of the rental car company’s coverage. See below for an explanation of what your credit card will cover.

You’re not confident behind the wheel or driving in a new city – If you’re nervous about driving in a new city and/or a new, unfamiliar vehicle, you may want to add their collision coverage for added peace of mind.

MAYBE:

Your own auto insurance policy has a high deductible and/or minimum liability coverage – If you only carry your state’s minimum in coverage and you’re involved in a major accident, your policy may not cover all of the damages. You’ll have to pay the difference. That can run into the tens of thousands of dollars. You may also have to pay a large deductible.

You have homeowner’s or renter’s insurance that covers your personal belongings –Some consumers want to avoid filing a claim through their own insurance because they’re afraid their premiums will go up. If that’s your situation, go ahead and add personal effects coverage. It’s one of the lower priced add-ons so it doesn’t add much to your rental car bill anyway. Of course, check to see how much the daily charges add up to before you do.

NO:

You are covered by your own personal auto insurance – Consumers who are fully covered and have high liability limits on their personal insurance policies can usually decline any extra coverage from the car rental company.

Your health insurance company offers personal accident insurance – You can probably decline this coverage. Check with your health insurance provider to make sure.

Some rental car companies also offer wrongful death coverage. If you have life insurance, you may already have coverage. Some health insurance companies offer it as well. Check to see if that’s the case.

You already have roadside assistance – If you have roadside assistance, either through an organization, your insurance or your credit card, you can waive this coverage. Double check with them to make sure they cover rental vehicles.

For consumers who haven’t rented a car in a while, note that the days of free roadside assistance are pretty much gone. The majority of rental car companies now charge for the service and that can really add to your final bill.

Won’t my credit card cover car rental insurance?

That depends. First some requirements. In order to have any insurance coverage through your credit card, you must:

  • Use that card to book your vehicle.
  • The person behind the wheel at the time of the accident must match the name on the credit card used to book the reservation.
  • You must decline collision coverage from the rental car company when you pick up your vehicle.

If you can tick off all three of these, then it depends on whether your credit card offers primary or secondary coverage.

Primary Coverage – If you have primary coverage, you’re covered in an accident. In fact, your auto insurance company will not be involved at all. The problem is that not too many credit cards offer primary coverage.

Secondary Coverage – Most credit cards only offer secondary coverage. That means your personal auto insurance pays out on the claim first. It only kicks in after your own coverage has been exhausted. An example would be to reimburse you for any deductible paid.

What can I do to avoid any surprises at the end of my rental?

Inspect the vehicle at pick up – One of the most important things you can do at pick up is to inspect the car thoroughly with the agent present. Take your time doing this. Don’t be afraid to point out anything that looks like a scratch or a dent.

Videotape or take photos as you inspect it. Don’t forget the interior as well. Sit inside the car. Lower and raise the windows and make sure everything else is in working order.

Rushing things may cause you to overlook a scratch or dent. That can end up costing you hundreds of dollars when you return the car.

Inspect it again when you drop it off – When you bring it back, videotape or photograph the vehicle again, especially if no rental agent is present.

Ask questions – Don’t be shy. Ask questions regarding the actual rental paperwork. If there’s a fee you don’t understand, ask what it’s for.

There are cheaper car rental insurance options out there.

Through online booking services – If you rented your car through an online travel service, you can purchase additional coverage directly through their site. Most offer the same rental car insurance for considerably less than what the rental car companies charge. You need to add it at the time of booking.

Third party car rental insurance providers – Another lower priced choice is car rental insurance through a third-party provider. Again, you’ll have to plan in advance. These policies are offered by several established insurance companies at up to 1/3 less than what the rental car companies are charging.

What happens if I do get into an accident with my rental car?

Getting into an accident with a rental car is a little more complicated than with your own car. There’s a third party involved: the car rental company. Here’s how they’re likely to proceed.

The rental car company doesn’t really care who’s at fault. 

When you rent a vehicle, you promise to return it in the exact same condition it was in when you were handed the keys, whether you caused the accident or not. That is clearly spelled out in the paperwork you sign on the day that you pick up the vehicle. The state of their vehicle is their main concern.

The rental car company will tap your insurance even if you didn’t cause the accident.

The rental car company will want their vehicle back in circulation as soon as possible. They will go through the insurance you used when you booked your reservation to make sure they’re covered, whether you are at fault for the accident or not.

As for any deductible, generally, you’ll have to pay that directly to the rental car company. Again, it doesn’t matter if you were at fault for the accident or not.

They may charge a “loss of use” fee for each day the rental vehicle is in the shop being repaired.

Depending on your insurance coverage, you could potentially be billed for rental charges while the vehicle is being repaired. This is called ‘loss of use”.

If it takes a week to get the car fixed and back into the rental car company’s fleet, you might be on the hook for an additional week’s rent. If you have loss of use coverage, but the time the vehicle is in the shop exceeds the limits of your coverage, you’ll be billed for the difference.

All that aside, you should consider contesting this controversial fee. Many consumers have successfully challenged it through their insurance companies.

What about the other driver and you?

If you are at fault – If you have complete personal coverage, your insurance will cover all expenses. However, your insurance rates could go up as well.

If you are at fault but don’t have sufficient coverage, you will be liable for any property and personal damages due to the accident. The other party may also come after you for medical expenses, lost wages, and pain and suffering.

If you are not at fault – If you’re injured in a car accident, you should pursue legal action against the at-fault party to recoup any damages, deductibles, medical bills and lost wages incurred. It’s important to call a personal injury attorney as soon as possible after the accident. A good personal injury attorney will have experience dealing with accidents involving rental cars.

You have the facts, now the final decision is yours.

Deciding what coverage to accept and turn down is a highly personal one. For some, a $1,000 deductible is not a big deal, for others it absolutely is. Then there’s the question of how much liability you want to expose yourself to. That all depends on what you’re comfortable with. You might be the type of person who wants a stress-free rental and doesn’t mind spending extra for that. Or you may be willing to take a chance to save some money.

The bottom line is: Know what your personal insurance and credit card cover before you reach the rental car counter.

Hopefully, you’ll have an incident-free rental. But if you are injured in a car accident and were not at fault, you’ll want an experienced car accident attorney by your side.

At Wilshire Law Firm we know the complexities that accidents involving a rental car can present. Our attorneys will fight to make sure you obtain a fair and just settlement. We have your best interests at heart and are ready to assist you every step of the way. Contact us today at 1-800-522-7274.

For further reading and information, visit:

DMV: When to buy rental car insurance
Consumer Affairs: Car rental insurance tip sheet
Department of Insurance: Things to know about car insurance and rental cars before starting your road trip

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