Whether you are visiting family out of state or are out of town on business, it is likely that you have rented a car at some point in time. In 2018 alone, the car rental market made over $30B. With so many Americans opting to rent vehicles instead of using their own, the question of rental car insurance emerges.
Who would cover a claim on a rental car? What would be covered? Could I experience any out of pocket expenses? These are all logical questions, ones that responsible consumers would consider. While every Personal Auto insurance carrier provides different coverage limits and exclusions, it is crucial to understand your personal auto insurance policy prior to renting a car.
Current Insurance Coverage on a Personal Auto Policy
Though some insurers would lead consumers to believe that rental car coverage is not included on their personal auto policy, the truth is that some coverage does exist. To what extent is the question? Sections within your personal auto policy that may extend to a rental car include:
- Liability Coverage: A coverage limit that pays for another person’s medical bills if you are found liable for an accident. This often includes a “per person” maximum limit and a “per occurrence” maximum limit.
- Collision Coverage: This coverage helps repair your vehicle if it collides with or is struck by a physical object other than an animal. This coverage will typically include a deductible that must be paid out-of-pocket.
- Comprehensive/Other Than Collision Coverage: Coverage that repairs a vehicle if it is damaged by a covered peril other than collision. Collisions with animals will also be covered under this limit. A deductible will typically apply.
Please note that although current coverage selections and limits may apply to a rental car, only the selected coverage will extend. For example, if you do not have collision on your current vehicle, it is unlikely that your insurer will provide it to a rental.
Understanding Rental Car Insurance Coverage Options
When you walk up to the counter to reserve a rental car, many different options are available for purchase. The selections can be daunting and limitless, and many customers are unsure of what they truly need to purchase. When in doubt, it is always a good idea to purchase the broadest coverage available. However, it would be advantageous for a consumer to know what they need before they are presented with potential packages.
- Liability Coverage — Protection to cover you if you injure someone or something while you are driving. This coverage is intended to cover bodily injury or property damage to another driver or their property.
- Collision/Loss Damage Waiver — Also known as LDW or CDW, this coverage is intended help pay for the cost of rental car repairs if you damage it. It technically isn’t a type of insurance. Since there are some exclusions in this coverage, additional or duplicate coverage may be picked up by the personal auto policy.
- Personal Effects Coverage — Belongings that are being transported or stored in a rental car are susceptible to theft or damage. This coverage helps provide monetary compensation for the items that are within the rental car. Some renters may find that contents coverage under their homeowners insurance may also provide limited coverage for this exposure. However, homeowners insurance typically places a limit on the amount of coverage available for items away from the premises.
- Personal Accident Insurance — Similar to medical payments on a personal auto policy, this coverage helps cover medical bills for the driver and passengers in a rental car. This is another area of review that is necessary, since coverage may already be provided within your personal auto policy or limits be be inadequate.
Depending on your personal auto policy coverage and the rental options that are selected, two more concerns exist for individuals renting a car. These loss exposures may not be adequately covered by any policy, so obtaining the broadest coverage available may be ideal. These concerns include:
- Diminution in Value — In the event that a rental car is damaged and adequate coverage is available to repair the unit, a diminution in value may still prevail. This is based on the theory that a wrecked and repaired car, though returned to working condition, is not valued the same as a previously undamaged car. Rental companies may hold the renter liable for such a reduction in value.
- Loss of Use — When a rental car is damaged, it is not able to be rented and thus generate revenue during the time of repair. Loss of use is a particular charge that rental car companies like to tack on to compensate the company for lost revenue during the time of repair. The renter may also be liable for such loss, and if no insurance is available the monetary exposure would fall back on the renter.
Play It Safe
Though there is no need to duplicate car insurance coverage, renters must understand what is offered through their personal auto policy and what services/coverage limits are essential to purchase from a rental car company. Reading through policy language and forms can be confusing, so a consumer’s best option is to consult with their insurance agent prior to renting a car.
Our agents at Webb Insurance Group can help decipher coverage limits and determine what is necessary before a loss occurs. Our professionals are trained in policy language, insurance law and the quirks of complex coverage manipulation between policies. Play it safe, and seek advice from the experts.