Rental Car Insurance

Straight answers to the nagging questions about Rental Car Insurance

Rental Car Insurance

You've just started your vacation. You've arrived at your destination by plane, collected your luggage, and are in the process of renting a car.You've given the person behind the counter your driver's license and credit card, and now you are being asked if you want to buy "coverage"from the rental car company.

Do you need it?

Possibly not, but how can you be sure? The best way is to be prepared and know the answer to this question before you leave on your vacation. Call your Broker or Agent before you leave to be sure. They will also provide any paper work you might need for proof of insurance to rental company when you arrive.

Why shouldn't you buy insurance from a rental car company? The person behind the counter is (usually) not a licensed insurance professional. He or she is not conversant with insurance laws and won't know whether or not your personal auto policy covers you when you rent a vehicle. 

This Coverage Is Incredibly Expensive

* Fact. While it's true you could be making a costly mistake if you need the rental car coverage and don't buy it, you're also making a costly mistake if you buy it when you don't need it.

Rental car insurance is incredibly expensive. On a daily basis,which is how it is sold, the rental car coverage can cost 10 to 20 times more than your personal auto policy. If you buy all the coverage's offered by the rental car companies, you could easily double the daily cost of your rental vehicle.

So who needs to buy the rental car coverage? Well, here's who doesn't. If you have insurance for your own cars, including collision and comprehensive coverages, you don't need the rental car insurance - provided you have the SEF 27 - Legal Liability for Damage to Non-Owned Automobile endorsement  on your policy, call your broker this coverage is cheap and easy to add to your policy. It only applies the coverage's you have so if you don't carry any collision or comprehensive on your policy this cant be added.

If you're on vacation, no problem. Just say no. If you're on vacation but planning to do some business you need to talk to your auto insurance broker if you mix business and pleasure on the trips where you plan to rent a car.

* Note. One thing to keep in mind: Your collision and comprehensive coverage's on your personal auto policy have deductibles (the amount you must pay before the insurance kicks in). Those deductibles apply to damage to rental cars as well.

What if You Don't Carry Collision Coverage?

So what happens if you don't carry collision and comprehensive coverage's on your own cars? Many people don't, particularly if they have vehicles that are at least 10 years old.

* Note. If you don't have collision and comprehensive, your personal auto policy won't cover damages to the rental car if it is in an accident, stolen, vandalized, collides with an animal or burns.

So what should you do?

You can risk it, not buy the rental car company's collision damage waiver (CDW) or loss damage waiver (LDW), and hope you don't have an accident or encounter anything that damages the vehicle. You'll save money, but it might not do much for your peace of mind, particularly if you're driving in a strange city or area.

* Tip. If you're averse to risk, you probably should buy the CDW or LDW. Some rental car companies offer some options with their CDWs or LDWs. Some come with deductibles, like regular collision and comprehensive coverages, while others provide first-dollar coverage.

First-dollar coverage comes at a higher price and some options limit the coverage. In other words, after a certain amount of damage to the vehicle, say $5,000, you would be responsible for paying the remaining damage costs.

What if You Damage Another Vehicle When You're Renting a Car?

What about damage or injuries you cause to other vehicles and people while you're driving the rental car? If your personal auto policy includes liability insurance), your policy will pay for any damage or injuries you cause to other cars or people after rental car companies primary insurance is exhausted - up to the limits of your policy, of course.  

Most States and Provinces require rental car companies to provide some liability coverage (primary) to you at no charge. The limit of the free liability coverage is equal to the state's minimum liability limits.

Is this enough? Probably not, and certainly not if you cause a serious accident.

The minimum liability limit requirements can be as low as $15,000 for injuries to any one person, no more than $30,000 for injuries to all persons, and no more than $5,000 for damage to the vehicle(s) you hit in some States. That's not much at all. 

If you have any concerns about whether you need to buy the coverage's offered by rental car companies, you should talk to your auto insurance broker. Rental car insurance can double your daily rate. That's a lot to pay for something you don't need.


 Note:    In Canada the SEF 27 rental car endorsement  only covers you while in Canada or continental United States , so no Hawaii or Mexico destinations are included.