Understanding the Pros and Cons of Car Rental Insurance
If you have rented a car before, you already know the drill. The rental agent will try to sell you insurance, and because you aren't certain what your own policy covers, it's easy for the agent to guilt you into buying their insurance. Rental agencies count on this. The commissions from selling insurance make a surprisingly significant contribution to the net profit of the rental.
Do you have to have to buy insurance from the rental company? The answer is no. Companies are required by state law to carry the minimum amount of property and casualty coverage on each vehicle. The cost is typically included in the base rental rate. That said, you do need insurance for the same reasons you have greater than the minimum amounts on your own car. You want to avoid the expense and liability associated with a car accident.
What you may not realize is the number of resources you may have that assist in providing rental car coverage.
Alternatives to Buying Insurance from a Rental Car Company
On average, insurance from a rental car agency costs about $61 a day. Coverage that you may already have could significantly reduce or eliminate that cost. You just need to know where it is and what it is.
Personal Auto Insurance
Most automobile policies will extend coverage to rental cars providing the rental is for personal use and you or another named insured on your policy is the driver. However, keep in mind that your collision and comprehensive coverages have deductibles. You will still have to satisfy those deductibles if the rental is damaged or stolen.
Credit Card Coverage
Most major credit card companies offer rental car coverage for theft and collision if the card is used to book and pay for the rental. It is secondary insurance, meaning it only kicks in when any other insurance is exhausted. The better credit card policies will also cover "loss of use" claims by the rental car company.
If you are involved in an accident, and the car is tied up in the shop for a week, the agency can legitimately claim a "loss of use" for each of those days the unit is not available for rent. Contact the credit card company and make certain your card offers this coverage; otherwise, you should definitely purchase it from the rental agency.
Employer's Auto Policy
If you are traveling on business, your personal policy won't cover you. Check with your employer to see what their rental insurance strategy is.
Personal Health Insurance Policy
Medical payments offered by the rental agency will most likely be covered by your personal health insurance. Check with your carrier about accidents outside the country to ensure you are covered.
Homeowner or Renter's Insurance
Both of these policies will provide coverage (with limits) should you have personal items stolen from the car. Typically this requires the filing of a police report.
If you don't own a car and don't have automotive insurance, you can buy a non-owner policy from a third party. If you frequently rent, buying a non-owners plan may be less expensive than buying from a rental agency.
When You Should Buy Insurance from the Rental Car Agency
There are occasions when the smart move is to buy coverage from the rental company.
- Renting with a debit card or cash: Debit cards rarely offer the auto insurance benefit of credit cards. We can't overemphasize how nasty, expensive, and time-consuming a "loss of use" claim can be. Without insurance, the rental agency simply charges your card, and you will end up using an attorney to negotiate the amount. If you don't have coverage, purchase the Loss Damage Waiver (LDW) offered by the rental company.
- Avoiding high deductibles: If your personal policy has exceptionally high deductibles because you live in the boonies and the risk of an accident is minimal, you can avoid them by buying directly from the rental company.
- Traveling internationally: All bets are off with your alternative insurance resources if you rent a car outside the country. Buying from a rental agency can save time and confusion.
Like always, knowledge is power. Before you book a rental, understand (and confirm) what insurance resources are available to you that can be applied to any cost or liability arising from an accident or theft while in a rental vehicle. Do not travel underinsured. It simply is not worth the risk.