Rental Car Company coverage versus the Private Auto Insurance Policy
So you’ve flown out of town on a family vacation, you’ve arrived at the airport and you’re in the process of picking up your rental car. As you’re signing the paperwork, the rental car representative asks, “Did you want to purchase the auto insurance coverage?” You have already checked with your auto insurance agent in anticipation of this question. Your agent had indicated that since you are currently carrying the Comprehensive and Collision coverage on the owned vehicle listed on your policy, and since this was a temporary substitute for that vehicle, then your current auto insurance policy with that particular company would extend the Liability coverage and the Comprehensive and Collision coverage to the rental car. Therefore, one can conclude that if anything happens to the rental car while you are renting it then you have nothing to worry about, correct? Not necessarily. Let’s take a look at some of the “gaps” in coverage that the typical Auto Insurance policy could present and how the rental car coverage would possibly provide protection.
There are two options that have to be considered when weighing the choice of purchasing rental car coverage through the rental car company: liability and physical damage. The first consideration, liability coverage, protects the driver for bodily injury and property damage to third-party property that the driver may be liable for if he/she causes an accident. The rental car company will usually offer the option to purchase the liability coverage through them. Keep in mind, typically this coverage is “in excess” of the liability coverage on your private auto insurance policy. As a general rule, the rental car liability coverage will provide the same protection as the private auto insurance policy: it is simply “excess” coverage. Therefore, the only real incentive behind purchasing this additional coverage through the rental car company would be if you were concerned about being involved in an accident that could potentially be severe enough to exceed the limits that you currently carry on your personal auto insurance policy. Chances of this may be slightly greater since you would be operating an unfamiliar vehicle in, most likely, unfamiliar territory. However, if there were concern that your current limits on your private auto insurance policy may not be adequate, then your consumer dollars might be better spent by bumping up the limits on your current policy and having that additional protection all-year around.
The second option that should be considered pertains to the physical damage to the rental car itself. Here is where there may be discrepancies between your personal auto insurance policy and the rental company coverage. The personal auto insurance policy would provide coverage if the rental car were to become damaged, but what about the down time? An extensively damaged car could equate to significant income loss for the rental car company due to not being able to rent out that vehicle. A rental car company would have the right to go back to the renter for compensation. The personal auto insurance policy would not provide coverage for this. By purchasing coverage through the rental car company, this protection should be included.
If the car is extensively damaged, it may need a reconstructed title. In circumstances such as these, the vehicle ends up losing value. This is another example of a loss sustained by the rental car company that the renter could be held liable for. This “diminution of value” is not covered by the personal auto insurance policy, but, again, should not be an issue if coverage is purchased through the rental company.
For circumstances regarding damage that is covered by the personal auto insurance policy, do keep in mind that your deductible would be applicable. Therefore you would be responsible for paying the portion out of pocket, on the spot. Even if there is a likelihood that the damage is below your deductible limit, the rental company may insist on being reimbursed for the full deductible to cover unforeseen costs. You may also run the risk of not receiving a refund if the damage is ultimately below the deductible amount that you paid.
Also keep in mind that physical damage claims that may occur to the rental, which are paid for by the personal auto insurance policy, will be reflected on your driving record with your auto carrier. If you purchase the rental car protection and cause a physical damage loss to the rental, this payout will not be held against you. This could be considered a get-out-of-jail-free card.
An additional cost that the rental car renter could encounter is being held up. If the renter damages a rental car and does not purchase the rental coverage, the rental company could refuse the renter another car until the auto insurance company is reached and confirms that they will pay the claim. This is not the way most people would prefer to spend their family vacation. In other words, sometimes it is advisable to purchase the coverage and consider it “vacation insurance”. Leave the worries and unforeseen catastrophes to the rental car company so you your family can focus on enjoying that “getaway” that you worked so hard to earn.
In summary, although the personal auto insurance
is designed to protect an insured and their family from unforeseen losses when operating an owned or borrowed vehicle, there are additional responsibilities and liabilities incurred when entering into an agreement for a rental car. Therefore serious considerations should be made when rental car coverage is offered. As with any contract, you will also want to take a look at the terms and conditions of the rental company insurance and understand the stipulations and limitations of their coverage.
Posted by: Robert Lafaro