Are you fine tuning plans for your vacation? Thinking about renting a car? One of the most asked questions here at Penwell Insurance is “Should I purchase insurance offered on a rental car?” The answer as to whether you need to enroll for insurance coverage with a rental car company can be complex and there is no one answer for every customer. When we get this question, our response is to recommend taking the rental insurance if you want to be 100% protected..
For most situations, your personal auto insurance will provide coverage for physical damage to a vehicle if you have Comprehensive and Collision coverage under your policy, subject to deductibles. The liability coverage under your personal auto policy extends to the rental car. However, there are some potential gaps in coverage:
- Loss Damage Waiver (LDW) – Most rental car companies have agreements in place with car dealerships to sell the rental cars after a set period of time. These contracts have a stated purchase price for the vehicle. If you cause an accident and the car is damaged, it may become worth less than the contracted price and you could be responsible for the difference. Your personal auto policy likely excludes this coverage, but some companies, like MetLife, do include this so it is important to check with your agent.
- Loss of Use – Another area of exposure is “Loss of Use.” If you cause an accident and the vehicle is not available to be rented, the rental car company could bill you for the lost revenue while the car is being repaired.
- Comprehensive and Collision Coverage – If you have “comprehensive” and “collision” coverage on your current auto insurance policy, it will likely extend to your rental car (discuss possible exceptions with your insurance agent). However, if you have “liability only” coverage on your personal car, you will want to be sure to purchase the comprehensive and collision coverage offered by the rental car coverage.
- Even if your personal auto insurance policy does provide coverage, the rental car company may require immediate reimbursement for damages and may charge the customer’s credit card for the amount of damages. This could create some temporary issues with your credit limit.
As you think about renting a car the best recommendation is to start with your insurance agent by asking what your car insurance policy includes and excludes so you can make an educated decision on what risks you are comfortable taking.
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