Many Americans rent vehicles every day for business, pleasure, and other reasons. Many of us have been on-line booking a reservation or at the car rental car counter picking up a vehicle only to be asked about all the additional insurances available for an additional fee (ie. collision damage waiver, liability, etc). If you are like many of us, you politely decline the coverage thinking your personal auto insurance will cover any loss you may experience. Some will rely on their credit card to provide the coverage. But do we really know what our personal auto insurance covers?
HERE IS WHAT IS COVERED ON MOST PERSONAL AUTO INSURANCE AS RELATED TO RENTAL VEHICLES
1. Liability – Personal Injury to another party
2. Property Damage
3. Physical Damage
In order to get this coverage on a rental vehicle one needs to have comprehensive and collision coverage on their auto insurance policy. This will cover the claim for damage to the rental vehicle, however, you are still subject to your deductible. If for some reason you are missing either or carry high deductibles, the cost to repair the rental car could be higher than taking the coverage when you rent the vehicle.
There are certain items that are not covered on a standard personal auto insurance policy.
1. Loss of use of the vehicle. This is a direct charge back to you for the time the rental car is in the shop and not making money for the rental car company.
2. Depreciated value of the rental vehicle. If the vehicle was in accident, it may not be worth what it was prior to the accident and the rental car company may want to be compensated for the difference.
3. We all enjoy renting and driving brand new vehicles we take off the lot, but if we were to total that car, it’s replacement cost is depreciated. Sometimes in the thousands. This too is not covered by your auto policy and could be an out of pocket cost directly to you.
You may want to consider purchasing coverage such as Loss Damage Waiver (LDW) and Collision Damage Waiver (CDW) directly from the rental car company. Often this is discounted rate if purchased prior to the counter pick up and they sometimes offer personal effects coverage as well for a set amount.
What is difference between CDW and LDW?
CDW provides coverage if there is damage to a rental car through an accident. LDW on the other hand, is a combination of CDW and Theft Protection, which means that you will be covered for car replacement if your rental car is stolen during the period of your rental.
What is Supplemental Liability Insurance (SLI)?
SLI provides supplemental liability insurance insures you and authorized operators against claims made by third parties against you, the customer, for bodily injury/death and property damage.
When should Rental Car Coverage be Considered?
If you don’t have insurance, you’ll need to at least buy liability coverage from a rental car company. That’s because liability coverage is required by law in most states. Liability covers personal injury or property damage you may cause to another vehicle.
If your current policy does not have comprehensive and/or collision, you will need it.
If you’re driving abroad (apart from Canada), your current car insurance probably does not cover you. Check with your policy or with your agent to find out.
Types of Commercial Insurance needed for Rental Cars
You do need auto insurance to rent a car. If your business does not own a vehicle, you can purchase a Hired/Non-Owned Policy through your insurance agent. This type of policy will cover you in any car that you are driving for liability only. Coverage for comprehensive and collision would be an additional cost. If you are frequently renting cars, this policy may be cheaper then purchasing the rental car company’s insurance.
Your other option would be to purchase Collision Damage Waiver (CDW) from the rental company directly. This option can be expensive, however, if you do not have an auto insurance policy you may want to consider this option.
You may also want to check with your credit card companies. Many offer coverage for damage/theft involving rental cars.
Beware of Third-Party Bookings and purchasing the Insurance coverage. If using a 3rd party, you do not have insurance directly with the rental car company. You may still be required to file a claim with your insurance carrier then submit to the 3rd party. The rental car companies will not work through the 3rd party. Rental car companies suggest you go directly through them for the rental and the insurance as it typically less expensive.
If you are involved in an automobile accident with the rental vehicle and returned the rented vehicle with damages, you could be responsible for the following expenses:
Loss damage Waiver Amount
Contract Violation amount
Diminution of Value
Loss of Use
Most of these may not be covered by your personal vehicle insurance.
We always ask you to look at all your options prior to driving off the lot of the rental car agency. Take pictures prior to leaving the lot and after dropping it off for additional protection. Lastly, if you are involved in an accident with a rental vehicle, it’s a good idea to contact your agent and let them know. This could save some headaches down the road.