When you rent a car, you’d better be prepared for the rental insurance offer — where the rental agency wants you to buy supplemental coverage.
But people are generally divided on this issue. The National Association of Insurance Commissioners found that only about 20 percent of all consumers actually purchase rental insurance. The remainder didn’t want added costs or believed their car insurance or credit card would cover any damages.
Smart Business spoke with Ryan Clugston, client advisor for the Select Unit at SeibertKeck Insurance Agency, about what you need to know before you make your decision of whether to buy coverage or not.
Does a personal auto insurance policy provide coverage when you rent a vehicle?
Yes, your personal auto policy provides several coverages needed when you sign the rental agreement, which include:
- Liability coverage. This is protection for you. If you injure someone or damage their property, your policy extends the same liability protection you have on your owned vehicles to the rental vehicle.
- Medical payments. This is coverage for you and your family members in the event you are injured operating the rental vehicle.
- Physical damage. This is coverage for the vehicle you are driving. This will extend from your policy if you have collision and comprehensive coverage on at least one of your vehicles on your policy.
However, all drivers, even if they drive for a short break, must be listed on the rental agreement in order to drive the car. The rental car agreement is considered void if they are not listed upfront.
Also, there is likely to be an additional charge.
When does your credit card provide coverage when you rent a vehicle?
Most major credit cards offer secondary rental car insurance, picking up costs not covered by your personal auto insurance policy, if the rental is wrecked or stolen. But this coverage varies, even among cards within the same network, according to msn.com.
So, call your credit card issuer before you rent the vehicle, and ask if the issuer will cover ‘loss of use.’ This is the cost the rental car company incurs while the vehicle you rented is being repaired or relocated if it’s stolen, according to msn.com.
Generally you’ll need to use the card to book the rental, and you also must decline the collision damage waiver when you rent the car, according to msn.com.
Many cards don’t provide coverage in all overseas countries, so you’ll need to check on that, too.
Why is it often a good idea to buy supplemental rental insurance, even with these other types of coverage?
There are always issues with rental cars, and therefore many insurance professionals recommend that you buy the insurance sold at the rental car agency for both liability and physical damage. There are many reasons for this.
Insurance with many companies follows the driver, not the car. This means that your insurance may or may not be primary for your friend depending on what both of your insurance policies say. It can get messy in a claim.
If there is an accident, most rental car agreements state that they have the right to put the damages on your credit card immediately, and they sort out the loss after all policies are reviewed. That can put you in a bad situation until all is resolved.
If your insurance does respond to a loss, your personal auto policy will be surcharged for a full three years. You can avoid that if the rental car company’s insurance pays.
Rental car companies also can charge you for ‘diminished value’ in the event of a claim. Even after repairs are made, rental companies can state that they can’t get as much money when they later sell a car because it’s been in an accident. Insurance policies exclude this and the rental agreements will hold you responsible.
If you buy the insurance for liability and physical damage through the rental company and keep your insurance out of it, you will face fewer problems if there’s a claim later. It’s always a good idea to review your options and coverage with your trusted insurance provider before taking a chance.
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