One of the more common questions we receive is “should I buy the insurance from the rental car company”? Unfortunately, there’s not a simple answer to this but we’ll try to explain the options and provide some education and guidance.
Does my existing auto policy cover a rental vehicle?
Yes, with some exceptions. A rental vehicle is treated like a temporary replacement vehicle for your own car. Your same personal auto insurance limits and deductibles would apply to the rental vehicle. For example, if you have a $500 collision deductible, that same amount would apply if you were in an accident with the rental vehicle just as if it was your own car. If you hit another vehicle and cause damage to another party, the same liability limits on your personal auto insurance would also apply.
What are some “gotcha’s” in the rental car contract that would not be covered by any personal auto insurance policy?
Rental companies may hold the renter liable for a “diminution of value” charge when a rental car is damaged. This represents the reduction in a vehicle’s market value due to its having been in an accident. Also, with some types of damage, rental companies simply sell the damaged car for salvage. They then charge the renter the difference between the market value on the day of rental (“before”) and the amount the car brought at the salvage auction (“after”). Even if your personal insurance covers damage to a car, rental car companies may also charge the renter for the time the vehicle is not being rented (loss of use).
What is a Loss Damage Waiver (the thing they try to sell you at the counter)?
The upsell the person at the rental car counter hits you with is called a Loss Damage Waiver or LDW. It’s not insurance and is simply a contract that releases you from responsibility for certain damage (for a fee of course). With the waiver, the renter will not be liable for any damage to the vehicle. He or she will not be charged for repairs to the vehicle, for diminution in value, for before-and-after assessments or for loss of use. The renter can walk away from all responsibility for damage to the vehicle if they have not engaged in any prohibited use. All rental car waivers have a clause voiding the waiver if the renter improperly operates the vehicle at the time of the accident. The downside to the Loss Damage Waiver is the cost can sometimes be as much as the rental car itself.
Wouldn’t I have coverage from my credit card company?
Only some credit cards provide any coverage for a rental car and even then, coverage is generally not Primary Coverage. That means you would need to use your auto insurance first before claiming anything from the credit card company. It’s not a great option and is generally misunderstood. Unless the coverage is through a specific program like the one offered by American Express, it’s not a good idea to rely on this credit card benefit.
So, should I take the “insurance” option the person at the counter is trying to sell me?
Our best recommendation is to confirm with your agent that your personal auto insurance limits will apply to a rental vehicle (it should with the exceptions we discussed). Evaluate the cost of the Loss Damage Waiver to see if it’s worth it for you on this journey. If you are on a bucket list trip across the country, it may be worth it to not have to worry about turning a claim in to your insurance carrier if there is an issue or to not worry about the “gotcha’s” in the rental car contract that no personal auto policy would cover.