Coverage with Confidence
A foreign country recently held a friend of mine captive and blocked his return because he did not have rental car insurance. My friend had traveled to the United Arab Emirates on business and rented a vehicle. While there, another car hit him, the entire incident not his fault. Nonetheless, the rental agency somehow – we are still uncertain as to all the parties involved behind the scene – was able to hinder his departure from the country. He was refused boarding to the aircraft until he paid the rental agency in cash for the damage to their vehicle.
No matter where it occurs, whether traveling domestically or abroad, for pleasure or business, accidents in a rented vehicle can be a hassle. “Would you like to purchase rental car insurance for this vehicle?” Don’t you hate that question asked every time you rent a car? The rates can be high enough to double costs, but declining the coverage makes us feel exposed or imprudent. Let’s consider the information needed to accept or decline this coverage with confidence.
The Need for Rental Car Insurance
The rental car industry is in a massive slump due to the outbreak of COVID-19, leading to great rates for travelers who need a car. But while it’s a renter’s market, rental car insurance rates haven’t budged because the same risks exist regardless of pandemic circumstances.
Common Rental Car Insurance Risks
- Liability, Damage to Other People’s Property: whether running into another car or simply over a mailbox
- Liability, Injuring Other People
- Liability, Defense Costs
- Physical Damage: to the rental car
- Lost Income: to the rental car agency due to their inability to rent the vehicle while it is out of service and being repaired
From Your Existing Personal Auto Policy
Most personal auto policies extend liability coverage (risks 1, 2, and 3 above) to accidents involving temporarily rented vehicles. Exclusions and limitations can apply, a common one limiting coverage to accidents within the U.S., Canada, or Puerto Rico. Most personal auto policies also extend coverage to the physical damage of a rented vehicle (risk 4), provided the existing vehicles listed on the policy have physical damage coverage and that the rented vehicle was operated by a family member at the time of the accident. However, very few compensate the rental agency for lost income while the damaged vehicle is out of service (risk 5). This cost can be extensive depending upon repair time. That said, certain credit cards provide this coverage if the rental was paid on their card. Lastly, keep in mind your policy deductible will apply to any at-fault accident as well as lost income.
From the Rental Agency
Rental car companies often offer a waiver for loss or collision damage. This is not insurance, but instead waives their right to collect from you should the rental car be damaged in a collision, vandalized, or stolen. This protects from risks 4 and 5, but does nothing for the larger liability risks 1, 2, or 3. Many rental agencies offer liability protections as well but be sure they provide the coverage needed. Read the rental agreement as most rental car company employees are not licensed insurance agents and are legally limited in how they can advise you on the subject.
Weighing the Risk
So, how should you cover the risk of renting a vehicle? If you have no existing personal auto policy, the decision is simple: accept the insurance offered by the rental car agency.
For those who have a personal auto policy, first decide whether you would want an accident in a rental car to be paid by it. Any claim will count against your policy and could affect future rates. Therefore, if renting a vehicle in an area with which you are familiar or where the risk of an accident is relatively the same, it makes sense to allow your personal auto policy to cover it. However, if driving in unfamiliar territory or in a foreign country where the likelihood of an accident is greater, you may want to accept the rental car coverage even if only as an extra layer of protection before your current coverage kicks in. That said, if traveling in a foreign country, we always recommend obtaining coverage through the rental car agency.
If you decide to cover the rental with your existing personal auto policy, contact your Bankers Insurance agent or read your policy to ensure you are comfortable with the coverages. We will help determine your risks and advise how to best cover them. Not a client of ours? Let us earn your business! Each of our clients is assigned a personal insurance agent and provided their email address as well as a phone number that rings right on their desk.
David McCaleb LinkedIn
Bankers Insurance LLC