Question: I am going to be renting a car while traveling. Will my auto policy cover me or should I purchase coverage from the rental company?
Answer: Check with your insurance agent or company and your credit card contract to see how your coverage applies before renting a vehicle.
If you have a personal auto policy, then the liability will most likely extend to the rental car in the United States, Canada and U.S. territories. If you have comprehensive and collision coverages on your auto policy, then they too will likely extend. You may also wish to consider purchasing “supplemental liability protection” and physical damage coverage known as a “collision damage waiver” for the vehicle from the rental car agency.
The advantages of purchasing these coverages are:
• You may be able to increase your liability coverage.
• You may have no claim to turn in on your auto insurance policy which could adversely affect your premiums.
• In the event of damage, you may walk away without any additional liability provided you have a police report for the accident or pay only a deductible if you purchased an option with a deductible amount. Some credit card companies may reimburse you for the deductible amount.
If your rental car is damaged and you haven’t purchased the collision damage waiver, then you may need to pay the rental company not only for the damage to the vehicle, but also the “loss of use” and “diminished value.” For example, if you rent a $25,000 vehicle that is involved in an accident resulting in $10,000 damage, then your insurance company or the collision damage waiver will cover the repairs, perhaps subject to the collision deductible. If, instead of repairing it, the rental company sells the damaged vehicle for $8,000, then you’ll be liable for the diminished value of $7,000. That is the difference between the $10,000 from insurance and $8,000 from the buyer. Even if the vehicle is repaired, you may be required to pay for the days the vehicle was unrentable. In this scenario, you would need to pay $7,000 plus “X” dollars per day the vehicle is unable to be rented, which can add up quickly. Only a few insurance companies or credit card companies will pay for all of these expenses.
When renting a vehicle, be certain all potential drivers are listed on the rental agreement. If you’re renting for an extended amount of time, then verify with your insurance company any limitations on the number of days they’ll provide coverage for the rented vehicle.
Mexico travelers: U.S. insurance is not recognized by Mexico. You will be required to purchase the basic personal liability insurance, which is typically included in the rental agreement. The amount of liability coverage may be minimal, so it’s highly recommend purchasing extra supplemental liability insurance with the collision damage waiver.
Bryan Sergot is a personal lines agent with Wall Street Insurance Inc. in Edwards. The Wall Street Insurance team of highly specialized agents has been serving the insurance needs of the local community and vacation owners for the past 30 years. Call Wall Street Insurance at 970-926-4900 with any of your insurance questions or send an email to firstname.lastname@example.org.