Straight answers to the nagging questions about Rental Car Insurance
You have just started your vacation. You have arrived at your destination by plane, collected your luggage, and are in the process of renting a car.You have given the person behind the counter your driver's license and credit card, and now you are being asked if you want to buy "coverage"from the rental car company.
Do you need it?
Possibly not, but how can you be sure? The best way is to be prepared and know the answer to this question before you leave on your vacation.
Why shouldn't you buy insurance from a rental car company? The person behind the counter is (usually) not a licensed insurance professional. He or she is not conversant with insurance laws and will not know whether or not your personal auto policy covers you when you rent a vehicle (in most circumstances, it does).
Some rental car company personnel may say you are required to buy the coverage (not true) or you will be personally liable for any damage to the car while you are renting it (most likely, not true).
This Coverage Is Incredibly Expensive
* Fact. While it is true you could be making a costly mistake if you need the rental car coverage and do not buy it, you are also making a costly mistake if you buy it when you do not need it.
Rental car insurance is incredibly expensive. On a daily basis,which is how it is sold, the rental car coverage can cost 10 to 20 times more than your personal auto policy. If you buy all the coverages offered by the rental car companies, you could easily double the daily cost of your rental vehicle.
*Fact. One advantage to buying the Collision Damage Waiver (CDW) from the rental car company is if you do get in an accident you walk away and do not have to pay a deductible. The rental company also will not charge your credit card for loss of use while the car is getting fixed which could happen if you use your own insurance.
So who needs to buy the rental car coverage? Well, here is who doesn't. If you have insurance for your own cars, including collision and comprehensive coverages, you do not need the rental car insurance - provided you are not renting the vehicle for business purposes.
If you are on vacation, no problem. Just say no. If you are on vacation but planning to do some business, you are probably OK. But you should talk to your auto insurance agent if you mix business and pleasure on the trips where you plan to rent a car.
* Note. One thing to keep in mind: Your collision and comprehensive coverages on your personal auto policy have deductibles (the amount you must pay before the insurance kicks in). Those deductibles apply to damage to rental cars as well.
What if You Don't Carry Collision Coverage?
So what happens if you do not carry collision and comprehensive coverages on your own cars? Many people don't, particularly if they have vehicles that are at least 10 years old.
* Note. If you do not have collision and comprehensive, your personal auto policy will not cover damages to the rental car if it is in an accident, stolen, vandalized, collides with an animal or burns.
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 do not have an accident or encounter anything that damages the vehicle. You will save money (if nothing happens), but it might not do much for your peace of mind, particularly if you are driving in a strange city or area.
* Tip. If you are adverse to risk, you probably should buy the CDW or LDW. Some rental car companies offer some options with their CDWs or LDWs. Some come with deductibles, like regular collision and comprehensive coverages, while others provide first-dollar coverage.
First-dollar coverage comes at a higher price and some options limit the coverage. In other words, after a certain amount of damage to the vehicle, say $5,000, you would be responsible for paying the remaining damage costs.
What if You Damage Another Vehicle When You are Renting a Car?
What about damage or injuries you cause to other vehicles and people while you are driving the rental car? If your personal auto policy includes liability insurance (most states require some level of such coverage), your policy will pay for any damage or injuries you cause to other cars or people - up to the limits of the policy, of course.
* Note. If you are comfortable with the amount of liability coverage you have for your own cars, you do not need to buy additional liability insurance for vehicles you rent.
If you do not have liability coverage (if you do not have a car, you are probably not going to carry auto insurance) you actually may not need to buy the rental car company's liability policy, either.
Most states require rental car companies to provide some liability coverage to you at no charge. The limit of the free liability coverage is equal to the state's minimum liability limits.
Is this enough? Probably not, and certainly not if you cause a serious accident.
The minimum liability limit requirements are something like no more than $15,000 for injuries to any one person, no more than $30,000 for injuries to all persons, and no more than $5,000 for damage to the vechile(s) you hit. That is worthless if you get in an accident with injuries.
* Tip. If you have any assets to protect, you should strongly consider purchasing the rental car company's liability coverage, which costs $7 to $15 a day depending on the state and level of coverage you choose. Higher liability limits mean higher daily costs.
If you have any concerns about whether you need to buy the coverages offered by rental car companies, you should talk to your auto insurance agent. Rental car insurance can double your daily rate. That is a lot to pay for something you do not need.