The first time I ever rented a car I was unprepared for a very specific question. The agent behind the counter asked “Would you like to purchase rental car insurance?”
“I don’t know,” I thought, standing there with the deer-in-the-headlights look. My only thought was getting behind the wheel of the convertible I’d reserved.
So I listened to the spiel and bought the rental car insurance. A few minutes later I’m top down and cruising around Saint Croix with my new bride.
I realized later my decision had been a small financial mistake.
There is no question you need insurance to drive. According to the Department of Motor Vehicles, every state requires motorists to carry a minimum level of auto insurance coverage (or the equivalent in financial responsibility waivers). Such coverage is necessary to protect against damage to property or injuries to people caused by an accident.
But if you own a car, your rental car may already be covered. Once you realize the rules and what your own auto insurance policy covers, you will be able to answer the “Should I get rental car insurance” question with confidence.
To do so, you must prepare in advance by doing two things:
1) learn what types of coverage are offered by the rental car company and
2) make two important phone calls before you are standing at the counter.
Types of Rental Car Insurance Coverage
Rental car insurance is state regulated. The types of coverage and the cost will vary from state to state. In general though, these types of coverage are what you can expect to find:
1. Loss Damage Waiver (LDW).
This is also called Collision Damage Waiver (CDW). It is not technically an insurance product. Rather it “waives” the driver of financial responsibility if there is damage to the rental car or if it is stolen. If you refuse this product and aren’t covered by your own auto insurance policy, you assume responsibility for any damages to the car up to its full value.
It’s important to note that even with this waiver in place coverage can be retracted if damage to the rental car results from:
- negligent driving
- driving on an unpaved road
- taking the car out of state
- driving while intoxicated
- letting an unauthorized driver operate the car
Do I Need This?
If you own a car, the comprehensive/collision portion of your personal vehicle insurance should cover damage to the rental car. However, collision is not required in any state. So consider purchasing LDW if you’ve dropped that coverage to save money on your personal car insurance policy.
2. Liability Insurance
Liability insurance provides coverage for medical expenses and damage to another person’s property if you caused the accident.
According to the Insurance Information Institute (III), the law requires car rental companies to provide the state required minimum levels of liability coverage. It’s a cost of running their business. However, the level of coverage they provide is low (based on the state minimums) and does not offer you much protection in case of a serious accident.
Do I Need This?
The law requires liability insurance. Therefore, the policy on the car you drive includes it. Review the policy or call your insurance agent to determine if the level of liability coverage is sufficient. If you don’t have a car then consider purchasing the additional coverage from the rental car company.
3. Personal Accident Insurance
This insurance covers the driver’s and passenger’s medical bills resulting from an accident.
Do I Need This?
If you have health insurance or auto insurance, you should be covered already. The portion of your insurance that covers you is referred to as personal injury protection (PIP)
(PIP is not part of comprehensive or collision. It is a separate portion of an auto insurance policy that covers injuries to the driver and passengers of your – the policyholder’s – car.)
4. Personal Effects Coverage
Personal effects coverage protects your belongings from theft. If items are stolen out of the rental car you can be reimbursed for those items.
Do I Need This?
Most homeowners or renters insurance policies cover theft of personal items that occur away from your primary residence.
Ask Questions Beforehand
You can see the common theme on whether to purchase these rental car insurances rests with your own personal insurance policies.
So it would be a wise move to review the coverage you already have in place before renting a car. If necessary, call and speak with your insurance agent to clarify any gray areas. Ask them specific questions about what your auto, home and health insurance covers in case you have an accident with a rental car.
A second phone call to make would be to your credit card company. Many credit card companies provide collision and theft protection if you use their card to rent the car. These benefits usually kick in after your other insurances have been exhausted.
(However, if you don’t have the other personal insurances then you shouldn’t count on your credit card to pay. You should purchase the coverage offered by the rental car company.)
So do a little planning in advance of signing that rental car contract and learn what personal coverage you already have in place. It may help you save money by not purchasing a product you don’t really need.
Questions: Have you ever/do you ever purchase rental car insurance? If so, what was the reasoning for your purchase? What is your favorite type of car to rent?