In the car rental business, one of our most frequently asked questions is this:
Do I need rental car insurance? Won’t my regular car insurance just cover it if I’m in an accident?
Well, sure. Nine out of ten times, your regular car insurance will cover a rental car that you are driving. However, it’s really important that you make sure you’re not that one guy who isn’t.
Because this? Looks like an expensive rental car problem.
Here’s what you need to know:
Liability insurance rarely covers a rental car.
Is liability all you have? You’d better opt for the additional rental car insurance. Even it does transfer to a rental car, it will not cover anything with the rental car itself, only third party liability and bodily injury.
So the guy in the video? He’d be out of luck and paying out of pocket for the damage to the vehicle.
Sometimes full coverage insurance doesn’t cover a rental. Or you might not want your coverage to cover a rental.
Some full coverage policies only cover a rental car if your car is in a repair shop.
A majority of people, who have full coverage insurance, also have rental car coverage. But think about a few things:
- Rental cars may be covered by your full coverage policy. In the event of something happening, you will be required to pay your deductible immediately to the rental car agency.
- Rental car companies operate typically regardless of fault. If someone else hits you, they don’t care. They are filing a claim with your insurance, you are paying your deductible, and then it will be up to you and you’re insurance to seek payment from the person that hit you. It works like “No-Fault” does in Michigan.
- Filing a claim no matter the circumstances can be a bad mark on your policy. Claims filed on your policy increase the likelihood your insurance rates will go up.
- Your insurance policy may not cover loss of use. Rental car companies have the right to charge ‘diminished value’ and ‘loss of use’ charges when one of their cars goes into the shop after a customer get into an accident.
Credit cards sometimes offer rental car insurance coverage.
Yes, many major credit cards (American Express, etc.) do offer rental car coverage as one of the added bonuses of signing up with them. The thing that is not explained by the credit card company is that it is almost always considered secondary coverage.
Just because you have the coverage on your card does not mean the rental agency will accept it for damages on their car. They will still pursue your personal insurance for damages on the vehicle, still leaving you with a claim and having to pay your deductible. The rental company will then leave it up to you to submit that claim to your credit card. Typically the report is very lengthy, the credit card company still has the option to deny it, and even if it is approved you have to wait for reimbursement from them. A huge hassle, that still leaves you paying money.
Call your insurance company, not your agent.
Ultimately it is not up to your insurance agent, the credit card company, or even the rental car company – to decide whether you should purchase rental car insurance next time you rent a car. It is your decision.
The insurance agent is not going to pay your deductible, and typically they don’t care if your rates go up or you get stuck paying for diminished value. The credit card company will make you go through all their reporting processes, leaving the rental agency to pursue your insurance policy. The car rental companies love when people buy their insurance, because essentially it widens the profit margin. It makes the ‘low rate’ they advertise go up. They like to gamble on this because they figure the majority of the people who buy it won’t end up causing any damage to the vehicle.
The best thing a consumer can do is know their insurance policy, understand its restrictions, and weigh the pros and cons of buying the car insurance vs. filing an insurance claim.
I always buy it.
My insurance covers rental cars, but my deductible is cool $1,000 (my rates are low with the high deductible). Bottom line: I don’t feel like paying a grand (it is a recession, you know), and I know if I get another claim my rates are going up.