It has probably happened to most of us; you walk up to the car rental counter wishing you could rent the sports car but being practical settle for the compact and finally after the “I can upgrade you to…..” for only…..” pitch you settle on the intermediate and you can be on your way. But no, then comes the “do you want the insurance options” and the awkward moment of silence as your head tries to process do I need the coverage? Do I have the coverage? How much does it cost? Even insurance agents have to go through the mental calculation at the counter and here why?
Buying coverage from a rental car company is expensive and profitable for the rental car company. Rental car insurance is like the fast food pitch “would you like an apple pie with that or to supersize?”, you probably already have enough with your original order but the add-on always sounds nice. It is the same with the rental car insurance. Most of the things that can happen to you are probably already covered under your current personal auto insurance.
It’s all about risk.
So do you need to purchase the insurance that a rental car company offers? It’s all about risk and how much you are willing to pay (premium) to transfer the potential loss (dollars out of your pocket) to an insurance company.
I maintain that the risk (chance of an accident) is higher when you are driving a vehicle that you do not normally drive in an area that is unfamiliar to you, so the decision on insurance is important as the likelihood of an accident might be higher, but that does not necessarily mean you need additional cost or coverage. Read on.
Do I need the coverage?
Under your current personal auto insurance policy a rental car is considered to be a non-owned auto, as defined in the policy, and has the same coverage as you have on your owned autos that are listed on your policy. If you have more than one auto and they have different coverage, the rental car would have the coverage that is the broadest of the autos on your policy.
So do you need the rental car coverage? The only decision you need to make for liability is, are my limits high enough? If you agree that the likelihood of an accident increases due to unfamiliar cars or area then you may what to consider higher liability limits. You could purchase this from the car rental company but it would be a lot less expensive just to raise your limits on your auto policy. I would recommend that even if you are not renting a car, you would be surprised how little the next level of liability coverage actually costs.
For the collision coverage and comprehensive coverage (aka other than collision) you will need a little information about your current auto policy. First, if you have a liability only personal auto insurance policy you would definitely have a coverage gap and would need to purchase the collision damage waiver (CDW) or sometimes called the loss damage waiver (LDW). If you don’t and the rental car is damaged or stolen you are responsible.
If your personal auto policy does include collision and comprehensive coverage the rental car would also be covered and only your deductible would apply. BUT!
What am I missing?
Rental car companies make money two ways; first by having the cars rented and out on the streets and second by annually selling the rental cars. If the rental car in the shop for repairs, caused by your accident, they lose that rental opportunity and once the rental car is in an accident the resell value goes down. Both of these, loss of use and diminished value, could be charged to you and your personal auto insurance policy may not offer coverage. How much could that cost you? An exact amount is impossible to predict, but I’ve seen this easily be in the $5,000 range.
To protect yourself for loss of use and diminished value you will need to consult with two sources:
First call your insurance agent and ask, does my auto policy cover rental cars and is loss of use and diminished value also covered. Some insurance policies do cover and some do not, you need to know this before you rent the car.
Second call your credit card company; if the credit card is used to rent the car, it may include this coverage. Be sure to ask about both loss of use and diminished value and if there are any restriction. Get the actual coverage wording from the credit card company.
If your current personal auto policy or credit card does not pick up the loss of use and diminished value coverage then you need to decide do I want to spend $25 to $35 dollars per day for the rental car coverage? What would an agent do? Well I have done both. I have rented a car for a week and pretty much drove from the airport to my relative’s house and there it sat until I drove back to the airport. I felt the chance of loss was minimal and was willing and able to suffer the potential cost if something should happen. But I have also purchased the coverage when the weather was bad and when I knew I would be driving in congested, unfamiliar areas.
So what does it take to make a speedier decision at the rental counter?
Know before you go. I know my policy limits are or are not adequate, I know my current policy or credit card does or does not included the two major risks which are loss of use and diminished value, I do or do not feel comfortable with the area I will be driving.
Knowing this may not make your rental car insurance decision as quick as Watson, the computer, on Jeopardy, but will lessen the time standing at the counter with that perplexed look on your face.