The warm summer weather might have you itching for a road trip. But before you hit the road, you may need to spring for a rental car. And before you do that, you'll need to decide whether to purchase rental car insurance.
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It's a tricky decision, given the fact that you may already be covered through your existing car insurance or your credit card. "Your personal auto car coverage usually does cover rental car coverage," says Merle Scheiber of the National Association of Insurance Commissioners.
Through your personal auto car coverage, you'll want to make sure you have collision coverage, which pays for damages to your vehicle from accidents involving other cars or objects. "For people who already have collision coverage on the rental car, getting the rental car insurance policy is a waste of money," says Neil Abrams, an auto rental consultant of Abrams Consulting Group based in Purchase, N.Y. If you don't have collision coverage, you'll either have to pay for the rental car insurance or use a credit card to pay for the rental car—one that has rental car insurance built in.
A number of major credit card providers offer rental auto insurance to cardholders, such as Visa, but certain cards only offer it to elite members, so check with your credit card company first. For example, Visa's auto rental collision-damage waiver (given to Visa credit card holders) provides reimbursement for damage due to collision or theft up to the actual cash value of most rental vehicles. However, Visa's coverage kicks in only on theft or damage expenses that are not covered by other insurance or reimbursement. In essence, the credit card acts as a secondary insurer, and it would still be wise to have your own personal auto insurance.
The benefits of buying insurance from the rental company? It protects you from significant out-of-pocket expenses associated with loss or damage to the vehicle, including theft, says Abrams. Rental car insurance can cost roughly $20 to $40, depending on what plan you select. The collision damage waiver, also known as optional vehicle protection or loss damage waiver, can cost as much as $19 per day and shifts liability for collision damage from the person renting the car to the car rental company. Liability insurance, which provides protection for up to $1 million, costs between $7 and $14 a day. However, your personal auto insurance should already include liability insurance. For an additional $1 to $5 a day, personal accident insurance covers medical and ambulance bills for the driver and passengers in the event of an accident.
"The rental companies are required to provide statutory minimum liability coverage," Abrams says. "But in a significant event, that's not going to do much for you." Statutory minimum liability coverage provides some protection to individuals involved in an accident while driving a rental vehicle—the same minimum coverage that would apply to personal coverage.
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It's not insurance, in the technical sense, that rental companies offer, Abrams says. Rental companies are not licensed insurance agents in every state. Instead, they offer a protection package. "It doesn't help where clear negligence is involved," Abrams warns. "If you leave your car with the engine running and the key in the ignition, and the car disappears, the rental company may have a problem with that."
Abrams adds that some people are protected through their homeowner's policy. Home owners can extend the liability when the policyholder is not in their home, i.e., while renting a car. However, the provisions vary from one policy to another, so be sure to check ahead of time.
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Jan Zobel, a tax preparer in Oakland, Calif., rents a car when she travels to Hawaii several times a year. Zobel receives coverage using her American Express card, which charges her $17.95 per rental. "I'm not a big AmEx card user, but you can bet that I pay for every rental now with that card," she says.
If you decide to purchase insurance through the rental car company, be sure to read the fine print. "Most people do not read the rental agreement," Scheiber says. "Every car rental agreement can be different, and you should be aware of that when renting a car. Most agreements are similar but like anything, when you sign your name to something, or agree by signature to a contract, you should know what you are signing. You can be contractually obligated." For example, the agreement might only cover one driver, so that would prevent you from taking turns on the road with your spouse. Don't be afraid to call the rental car company and ask questions before you take the insurance policy.
Above all, make sure you have some form of insurance on the rental car. The last thing you want is to get into an accident and be underinsured—or worse, uninsured. Many rental companies will allow uninsured customers to rent a car. For example, if you reserve from Hertz at the airport, the reservationist will not ask you for your insurance policy, nor do you have to show proof of insurance, Abrams says. "If not insured, the renter must understand exposure and liability, what coverage they may have through credit card or homeowners, and look at protection packages offered from the rental company," he says.
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