Example. You’ve just started your vacation. You’ve arrived at your destination, collected your luggage, and are in the process of renting a car. You’ve given the person behind the counter your driver’s license and credit card, and now you are being asked if you want to buy “coverage” from the rental car company.
Do you need it?
Probably not, but how can you be sure? The best way is to be prepared and know the answer to this question before you leave on your vacation.
So why shouldn’t you buy insurance from a rental car company? The person behind the counter is (usually) not a licensed insurance professional. He or she is not conversant with insurance laws and whether your own personal auto policy covers you when you rent a vehicle.
Some rental car company personnel may say you are required to buy the coverage (not true) or you will be personally liable for any damage to the car while you’re renting it.
This Coverage Is Incredibly Expensive
Fact. While it’s true you could be making a costly mistake if you need the rental car coverage and don’t buy it, you’re also making a costly mistake if you buy it when you don’t need it.
Rental car insurance is incredibly expensive. On a daily basis, which is how it is sold, the rental car coverage can cost 10 to 20 times more than your personal auto policy. If you buy all the coverages offered by the rental car companies, you could easily double the daily cost of your rental vehicle.
So who needs to buy the rental car coverage? Well, here’s who doesn’t. If you have insurance for your own cars, including collision and comprehensive coverages, you can extend the coverage to the rental car — provided you are not renting the vehicle for business purposes.
Call your broker before leaving for your vacation, and ensure that you have OPCF 27 Physical Damage to Non-Owned Auto’s. It has a deductible, but is considerably less expensive than the car rental agency’s coverage.
What If You Don’t Carry Collision Coverage?
So what happens if you don’t carry collision and comprehensive coverages on your own cars? Many people don’t, particularly if they have vehicles that are at least 10 years old.
Note. If you don’t have collision and comprehensive, your personal auto policy won’t cover damages to the rental car if it is in an accident, stolen, vandalized, collides with an animal or burns.
So what should you do?
You can risk it, not buy the rental car company’s collision damage waiver (CDW) or loss damage waiver (LDW), and hope you don’t have an accident or encounter anything that damages the vehicle. You’ll save money, but it might not do much for your peace of mind, particularly if you’re driving in a strange city or area.
Tip. If you’re averse to risk, you probably should buy the CDW or LDW. Some rental car companies offer some options with their CDWs or LDWs. Some come with deductibles, like regular collision and comprehensive coverages, while others provide first-dollar coverage.
Obviously, though, first-dollar coverage comes at a higher price. And some options limit the coverage. In other words, after a certain amount of damage to the vehicle, say $5,000, you would be on the hook.
What If You Damage Another Vehicle when You’re Renting a Car?
What about damage or injuries you cause to other vehicles and people while you’re driving the rental car? If your personal auto policy includes liability insurance (most provinces/states require some level of such coverage), your policy will pay for any damage or injuries you cause to other cars or people — up to the limits of the policy, of course.
Note. If you are comfortable with the amount of liability coverage you have for your own cars, you don’t need to buy additional liability insurance for vehicles you rent.
If you don’t have liability coverage — if you don’t have a car, you’re probably not going to carry auto insurance — you actually may not need to buy the rental car company’s liability policy, either.
Most provinces/states require rental car companies to provide some liability coverage to you at no charge. The limit of the free liability coverage is equal to the province’s minimum liability limits.
Is this enough? Probably not, and certainly not if you cause a serious accident.
The minimum liability limit requirements are something like no more than $15,000 for injuries to any one person, no more than $30,000 for injuries to all persons, and no more than $5,000 for damage to the vehicle(s) you hit. That’s not much at all.
Tip. If you have any assets to protect, you should strongly consider purchasing the rental car company’s liability coverage, which costs $7 to $15 a day depending on the province/state and level of coverage you choose. Higher liability limits mean higher daily costs.
Is There Any Reason I Should Consider The Rental Company Insurance?
There is one occasion when you may wish that you had purchased the rental company insurance, and that is if a claim occurs. As mentioned, there is something to be said for filling out the proper claim report forms, handing them the keys and getting on the plane. That is what happens if you have purchased the CDW/LDW. The rental company then deals with their own insurance company to determine fault and costs of the occurrence.
If you are taking advantage of the extreme cost saving of extending your own coverages, there are some additional items to take into consideration.
Remember that you have provided the rental company with your credit card information, and authorization to apply charges from the use of the vehicle to that card.
In the event of an incident, they will be applying the deductible to the card, as well as their expenses for providing information to have the vehicle repaired. They will most likely be asking for loss of income for the time the vehicle is in for repair, as it will not be available for them to rent. Your insurance company will only compensate them if all vehicles they have in their possession were rented on those given days. But the rental company has charge your credit card for that lost revenue, and you are now in a position to have that charge reversed.
Each person must determine for themselves, what the best choice is for them, and what their risk tolerability is.
For further discussion or clarification of this issue, do not hesitate to call.