If you’ve ever rented a car, you know the drill: Before driving off the lot, you must first accept or waive your right to insure the vehicle against damages to it while it is in your care. Unless you know the ins and outs of your own insurance coverage, it can be difficult to decide whether to purchase or forego this type of insurance. Instead of hesitating the next time you are put on the spot, continue reading to find out more about rental car insurance and whether you really need it or not.
Rental Car Insurance isn’t Insurance At All
Though it is commonly referred to as ‘insurance,’ the coverage offered by most rental car companies is actually an agreement between the renter and the owner of the vehicle (the rental company). Known formally as a collision damage waiver, the fees paid for this extra benefit only mean that the rental car company will agree to waive its right to obtain compensation from the renter if something happens to the vehicle. While that can be reassuring, it also means that you still remain on the hook for other possible expenses stemming from an accident, such as:
- Bodily Injury Liability
- Property Damage Liability
- Personal Injuries
- And More
In addition, collision damage waivers are often filled with exclusions for certain types of losses and damages. For example, if you are in a car accident that was attributed to reckless behavior such as speeding, it could void the collision damage waiver agreement. Be sure to read all of the fine print and know exactly what is excluded before purchasing this type of coverage.
What the Collision Damage Waiver Covers
Although the collision damage waiver does not cover your personal losses or liability, it can provide some beneficial protection. First and foremost, it can exempt you from the responsibility of paying for repairs or replacement of a rental vehicle that is damaged or destroyed due to a covered event. This alone could save you tens of thousands of dollars depending on the type of vehicle, its age, and how many miles are on it at the time of the collision.
Collision damage waivers may also prevent the rental company from pursuing you for financial compensation of other losses, such as administrative fees, towing charges, and the company’s financial losses while the vehicle is being repaired after the collision. All of this is typically offered without a deductible, but it still comes at a price. In fact, it is not unusual for the cost of a collision damage waiver to increase the cost of renting a car by as much as 60 percent or more.
You Might Already Be Covered
Before you sign on the dotted line in the name of peace of mind, consider this: You might already be covered against damages to a rental vehicle. In fact, you could have multiple sources of coverage from which to choose should you need to file a claim.
Your Personal Auto Insurance Policy
In most cases, the coverage in your personal auto insurance policy will transfer to your rental vehicle. In fact, it is likely that you would have to file a personal claim for a rental car accident since the collision damage waiver and credit card companies are unlikely to cover liability or personal injury. Of course, you might be responsible for paying your deductible, which could cost hundreds of dollars.
Your Credit Card Company
If you use a credit card to purchase your rental car, there’s good news: You could have built-in rental car coverage at no added cost to you. Visa, MasterCard, Discover, and American Express all have cards with some level of coverage for car rentals, though these benefits often come with the stipulations, such as:
- You must decline the collision damage waiver
- You must reserve and purchase the vehicle with your credit card
- You must use credit card benefits as secondary coverage to your primary insurance (in this case, the credit card company might cover the cost of your deductible)
At the end of the day, it is important that you know what type of coverage you already have before deciding to accept or decline the collision damage waiver offered by your rental car company. Of course, you can always give us a call at Wheaton Insurance if you have questions about your existing coverage and whether it will transfer to any rental vehicles you drive.