With the summer travel season approaching, our customers will be soon be calling us and asking “….am I covered for damage if I rent a car on my vacation”. The answer to that question will be depending on that customer’s auto policy.
When is a rental covered?
If you are in possession of a rental car and it is damaged, the rental car company will seek recourse against you for all losses and damages resulting from the incident. The rental car company may charge you not only for the damage to the car but for the loss of rental income while the car is being repaired.
The method of loss coverage for a rental car depends upon a number of factors.
Your personal automobile policy. Rental car companies are diligent in their efforts to sell loss damage waivers and collision damage waivers (cost $8-25 per day). These waivers or options are generally not insurance but rather the rental car company’s version of comprehensive and collision coverage. When purchased, they essentially take the place of your own collision and comprehensive insurance. Thus, this waiver purchase takes you off the hook if the rental car is damaged, stolen or vandalized. (Note: some waivers are subject to a deductible, just like standard comprehensive and collision coverage.)
If your personal policy covers the comprehensive and collision, the coverage may be restricted to damage to the car, and not cover loss of rental income that the rental car company may demand. What’s more, you may be obligated to pay the deductible. In this case, purchasing the damage waiver coverage may be a sound option.
If your personal automobile policy covers rental vehicles under the liability section and the policy provides coverage for all legal obligations to the rental company, you may not need to buy the damage waiver. In addition, you won’t be charged the deductible.
It is worth noting that all personal auto policies have exclusions and limitations that apply to rental vehicles, as well as to personal-owned automobiles. Purchasing the rental car company waiver may result in some “double coverage” and you must decide whether covering the gaps that may exist are significant enough to warrant the additional cost. Some people will opt for
the peace of mind of having the additional coverage.
What about relying on a credit card for coverage?
Some credit card providers offer rental car insurance benefits free if the rental is charged on their credit card. Other companies while not offering free coverage, (Example: American Express offers an option called Premium Car Rental) they do offer benefits that can be purchased and may be a cheaper alternative than purchasing coverage at the car rental counter. However, the Insurance Information Institute (III) states that when a cardholder opts for insurance offered by a credit card company, it is imperative to request that details concerning the coverage be sent in writing to the cardholder. Credit card insurance coverage varies greatly from company to company. Some companies offer benefits that cover only damage to your rental car but not to other cars. Others do not offer personal liability coverage for bodily injury or death claims. Be forewarned that relying on a credit card for benefits has limitations that could lead to expensive consequences. In addition, coverage varies from company to company and is subject to change. In the final analysis, the decision rests with you.
Our role at Donald J. Medeiros Insurance is not to tell you what to do but to outline potential exposures and suggest solutions for all your insurance needs. Come visit us at www.donmedeirosinsurance.com or give us a call at 508-678-1271. We look forward to hearing from you!