It’s always a difficult choice when you are standing at the car rental
counter and the person on the other side asks you if you want to buy
Rental Car Insurance. Often they follow that up by referencing all sorts of
acronyms*… LDW, CDW, PAE, SLI and so on. All you really
want to do is get in the darn car and get started to your final
destination. But before you can, you have to decide, and you know that the wrong decision could end up costing you a lot.
What are the advantages and disadvantages of buying the insurance from the rental car company?
The huge advantage is that in the event of an accident, for the most part, you can hand the keys back to the rental company and walk away without another thought about the car that you damaged. You’ll still probably have to fill out a form and explain in detail what happened but that will pretty much be the last you hear of it (As long as no one has been injured in the accident.) You may want to get to the airport a little earlier than you planned since it will take more time than normal, but it won’t cost you anything.
The disadvantage…the cost! Sold on a daily basis, the actual annual cost
could be 10, even 20 times more than your Massachusetts auto policy. If you buy all the coverage they offer, you could double the cost of your rental vehicle.
Who needs to buy the Car Rental Insurance?
To make the right decision, you need to know what your policy covers…and what it doesn’t.
It is very important to know who is renting the vehicle, where it is being
rented and for how long. It is critical the name on the rental contract is
also insured on your policy. Generally, this will include you and any
licensed household members. However for coverage to apply, they must also be included as drivers on the rental agreement. Rent the car in the name of the person who is on the policy, not in a business name. Coverage may be severely compromised if you rent the vehicle in a name other than your own.
Where you are renting the vehicle is also extremely important. Your policy extends throughout the United States (its territories, possessions, and Puerto Rico) and Canada. However, if you’re going overseas or to Mexico, there will be little or no coverage under your auto policy.
Finally, if you are thinking of an extended rental, (generally more than 3
weeks) coverage may not extend to the longer term rental vehicle.
What does my auto insurance policy cover?
The good news is that as long as you have purchased Part 5, Optional Bodily Injury coverage your auto policy will pay for any damage or injuries you cause to other cars or people – up to the limits of the policy, of course. The rental car companies Supplemental Liability Insurance (SLI) effectively duplicates the coverage provided by your Massachusetts auto policy.
The SLI generally provides a higher limit of coverage than you carry on
your policy. If you are comfortable with the amount of liability coverage
you have on your own car, you probably won’t want to buy additional
liability insurance for vehicles you rent.
More good news: Your collision and comprehensive coverage will follow you and provide coverage for your rental car. The deductibles on your policy apply to damage to rental cars as well.
The rental company’s Personal Accident and Effects coverage (PAE) generally provides accidental death, medical expenses and ambulance expenses for injuries due to an accident. Additionally, it will cover a small amount of your personal property. The good news here is that your Homeowners Insurance policy will generally provide the same coverage for your personal effects. Your policy deductible will apply. Often times, the personal effects coverage from the rental car company has little or no deductible.
What is Not Covered?
Although your collision and comprehensive coverage will follow you in
a rental vehicle, they will not cover you completely. In addition to being
responsible for the costs to repair or replace the vehicle, most rental
company contracts also impose liability on you for the loss of use of the
vehicle and may include a charge for the diminished value of the vehicle
after it has been in a wreck. Also, your policy will only cover the actual
cash value of the vehicle while the rental agreement puts you on the hook for the full value of the car. In the event of a total loss, there may be some disagreement between the insurance company and the rental company as to the value of the car and you could end up responsible for the difference.
What If You Don’t Carry Collision Coverage?
Without collision and comprehensive coverage, your personal auto policy won’t cover damages to the rental car.
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.
If you’re more averse to risk, you probably should buy the CDW or LDW. If you have an accident there is a lot to be said about walking into the rental place, handing them the keys and shuttling off to the airport. There is no deductible, loss of use charges or any other costs related to the damaged car to think about.
If you do buy Rental Car Insurance (and even if you don’t) please be sure
to pay special attention to the portion of the rental agreement that spells
out what unauthorized or prohibited use of the vehicle consists of. Make
sure you are not in violation of this as it will void all liability
coverages and optional services.
Always feel free to contact us to discuss whether you need to buy the
coverage offered by rental car companies. We’re here and happy to answer any other questions you may have.
What about my Credit Card?
Most credit cards that provide Car Rental Insurance only provide excess
coverage. Excess coverage only pays after your auto policy has paid out its limit. The credit card usually excludes both loss of use and diminished value. Whether you buy the insurance from the rental company or not, use a credit card with a low chargeable limit. Although this doesn’t absolve you of responsibility, it does prevent the rental company from arbitrarily posting charges that you may have very legitimate reasons to dispute.
*Rental Car Acronyms That We Could Find:
LDW – Loss Damage Waiver
CDW – Collision Damage Waiver
PAE – Personal Accident and Effects
SLI – Supplemental Liability Insurance
PA – Personal Accident
PEB – Personal Effects and Baggage
UMP – Uninsured and Underinsured Motorist Protection