“Should I buy the rental car insurance from the rental company when I rent a car?”
My friend and fellow BNI member asked one Tuesday morning before the meeting. It’s a question that’s begging for a simple Yes or No, but there are some important issues to consider when renting a car. So I gave him the full on, 14 year insurance veteran, Certified Insurance Counselor dissertation as my response.
My friend smiled, and nodded a few times as I elaborated, and hypothesized scenarios. When I appeared done he responded, “You sound like a politician.” He was right. I failed at simplifying the rental car insurance scenario!
The short answers, for those you who aren’t interested in the whys and hows:
For Liability – Probably NO
If you have an ISO Personal Auto Policy, and you’re renting a private passenger vehicle (a sedan or small pickup) you have liability coverage. That liability coverage extends pretty broadly, but is cut-off if you rent a commercial vehicle (check your policy for your specific definition).
You are always covered for a Temporary Substitute for liability – so if you are going to rent a big U Haul, and you don’t need your car for the day, put it in the shop for an oil change or a tune up and have the U Haul count as your Temporary Substitute!
For Comprehensive & Collision (AKA Physical Damage) – Probably YES
If you have Physical Damage insurance on your Personal Auto Policy, you are covered for damage to rental cars after you’ve paid your normal Comprehensive or Collision deductible. However, there are several reasons the rental car insurance is a better option than your personal auto policy for Physical Damage coverage.
If the rental car is damaged while under your care, the rental car company is going to charge you for a few things that your auto insurance will not pay:
- Loss of use – the amount of rental income the rental company would have gotten on the car if it wasn’t damaged. Some companies will pay this up to your daily extended transportation expense coverage per day.
- Diminished Value – this accounts for the loss of market value the rental car company could collect when they sell the car after its life as a rental ends. This can be subjective, but rental car companies succeed in collecting this, and your Personal Auto Policy will NOT pay for this.
If you purchase the rental car insurance, the company will waive these claims, which could turn into expenses even if you have a good auto insurance policy. Additionally, you also get the peace of mind that you won’t have to file a claim on your insurance record, or worry about getting surcharges or potentially non-renewed for claims experience because of an accident in the rental car. The rental car coverage puts all of the claims experience on the rental car company, not you!
Rental Car Insurance excludes some things that your personal auto does not. Be sure to read the rental agreement thoroughly, with a magnifying glass because there is a lot of small print!
Some rental agreements exclude drivers that aren’t listed on the agreement, which means permissive users don’t have coverage like they do on your personal auto policy.
Taking the rental car off of paved roads eliminates coverage in most agreements. I had this happen to me when I was renting a car while mine was in the shop and I needed to visit a client who lived on a farm with no paved driveway. I drove more carefully on that property that day than I ever had before!
The rental agreement usually excludes any accidents when the driver is under the influence of intoxicants. This language is worded very broadly. You don’t need to be drunk, or using drugs to end up with no coverage. A glass of wine with dinner, or the normal use of some prescription medication could nullify your rental car insurance agreement.
The liability coverage rental car insurance offers is not usually necessary, unless you are renting a vehicle that counts as a commercial vehicle. Even then, if that commercial vehicle is a temporary substitute then your Personal Auto Policy should provide your limits of liability.
The physical damage coverage the rental car company offers isn’t perfect, but is worth the expense for the peace of mind knowing you won’t have uncovered damage claims as long as your follow the rules in the rental agreement. Additionally if you are in an accident with the rental car insurance, you don’t have to mar your insurance record with a claim!
If you have any questions or would like a quote for PA Auto Insurance, click here!