If you’re renting a car…THAT is the question.
By Sarah Lee Marks
Renting a vehicle has never been quicker or easier. In many cases, everything can be done online or through an app, avoiding the line at the counter altogether. You’ve seen the commercial: No waiting…just pick the car you want and go. One aspect of the transaction, however, hasn’t changed. In fact, it may be even more complicated. It’s the dreaded Liability/Damage/Personal Injury Waiver—which no one wants to pay for or even think about…but some of us definitely should.
The inclination for most is to decline this option. After all, between personal car insurance, credit card coverage and maybe even a homeowner’s umbrella policy, everything must be covered, right? Yes. Or no. Or maybe. In the end, it’s up to you to make that determination. And better to make it before something goes wrong than after.
Beth Hofgesang, an insurance agent with Arthur J. Gallagher in Whippany, suggests digging your auto policy out of whatever drawer or folder it’s in and reading it carefully before hitting the Decline button. Make sure you understand any exclusions as they relate to rental vehicles, as well as checking that your liability coverage actually extends to a rental. It’s time-consuming but well worth the effort. What if you just don’t feel like it?
“Then I usually recommend that my clients take the waivers and coverage offered by the car rental agency,” she says. “Their coverage includes loss of use, diminished value and allows you to walk in and get a replacement vehicle to continue your travel. Also, you avoid a claim against your own insurance, which will likely get you a premium hike over the next three-to-five years.”
If you do not own a car—or if your car is insured for less than the one you are renting—you should definitely take the rental car program, Hofgesang adds. “You can’t expect the insurance company covering your 1999 Jetta to pay a claim on your rented $150,000.00 Tesla.”
When you start reading the fine print on a waiver, you’ll likely notice that it is broken down into four types of coverage:
- Collision or Damage: The average cost for this coverage runs $10.00 a day for your rental vehicle. Your fault or not, paying for it at the counter keeps you off the hook for repairs. Agents often push you to buy this added coverage by explaining your Loss of Use exposure. Loss of Use is the daily rental fee the company isn’t getting while the car is in the body shop. Diminished Value should also be included in this coverage. Diminished Value is the reduction in vehicle value as a result of damage to the car while you were renting it. You may have this coverage on your car, but be aware that a claim to your insurance for a rental car crash affects your insurance premiums just the same. If you do not have Collision coverage on your personal car, consider purchasing a separate policy to cover your rental car.
- Liability Insurance Rental: agency liability coverage could cost as much as $18 a day for $1 million in coverage. If you have liability coverage on your own auto policy, skip this pitch.
- Personal Injury or Personal Medical Accident Insurance: For as little as $6 a day, you and your passengers’ medical bills from injuries resulting from a car crash are covered. Be aware that you may have personal health insurance or medical protection on your current auto policy. If so, ask the car company how much the top dollar value is on this policy and compare it to your own, before adding the cost to your rental bill.
- Stolen Property Coverage: Your homeowner’s policy covers items in your car, and by extension a rental car. Weigh the additional cost on your daily rental budget against the value of items that could go missing.
So what about credit card coverage? Yours may provide coverage for theft, collision, damage, tow and loss of use if you pay for the rental vehicle with your card. You may elect to take the rental company’s coverage if your trip extends beyond the coverage time limit of the card, or based on the type of car being rented. Check with your credit card supplier regarding limitations in the coverage before relying on the company to protect you. Ask if all drivers are covered, regardless of them being listed on the rental contract, or whether they are authorized users of the credit card. This is important information to know going into a rental if a spouse or relative or friend will also be driving and you’d like to avoid the “additional driver” fees. Rental car agencies want any driver using the vehicle to be listed on the agreement. If there is a crash with an unlisted driver, the damage waiver you purchase from the rental agency could be voided, leaving you with a fat bill or kicking it back to your own insurance.
What if you’re renting something other than a car for business or pleasure? This is a question few people ask. In most cases, moving trucks, trucks for hire from a place like Home Depot, and cars used for ridesharing or delivery services are not protected by the credit card company or your personal auto insurance policy. Also, coverage limitations are typical for exotic or luxury vehicles rented with your credit card, so know what they are.
If you’re that person who never rents a car, I’d like to congratulate you for getting this far in the story. And here’s your reward: If you are driving a loaner while your car is in the shop for repairs, you may be “renting“ without knowing it—at least from an insurance standpoint. You may be asked to sign a “borrowed car agreement” and the dealer will make a copy of your driver’s license and insurance card. Does that mean you are accepting the primary responsibility for insuring their vehicle in case of a collision, personal injury, loss of use and diminished value?
The answer is likely yes, unless you are specifically informed otherwise. Think about what might go wrong: Say they are tossing you the keys to a $30,000 loaner and you only have liability on your old car. You’ll be on the hook if there is a collision—even if it’s not your fault. Ask about the dealers’ policy before you sign anything. And if a crash isn’t your fault, be sure to collect all relevant information from the responsible party and obtain a copy of the police report. Failure to do so could land you with a huge repair bill and—even if your auto insurance covers the collision damage—you can expect a premium price hike after the claim.
Leaving the country and thinking of renting? Start by applying for an international driver’s license well before your planned departure. Also, contact your insurance agent to determine what your existing policy covers. There are third-party carriers who can provide an international auto policy. These plans act as the primary insurer and are separate from your personal car policy.
Editor’s Note: Sarah Lee Marks is a car concierge and automotive consumer advocate for all things car-related. Sarah lives in Henderson, Nevada with her husband, Norman. You can ask her car questions at her website: www.mycarlady.com.