Should I Buy Insurance From the Rental Car Company?

Plain and simple, insurance can be confusing. Sure, you’re covered by your auto insurance in your vehicle in the event of an accident. But, what if you’re driving a rental vehicle? If you’re considering renting a car, whether it is for a vacation or a moving truck, we strongly advise that you purchase the Rental Car Damage Waiver from the rental company. Below are 10 reasons from Big “I” Virtual University.

1. Loss Valuation – The value of a rental car, according to the majority of all rental agreements, is determined solely at the discretion of the rental company and may be significantly more than the market value of that particular vehicle. The rental agreement may very well contractually obligate the consumer to reimburse the rental agency for the full value of the vehicle. Depending on the use of the rental vehicle, this may or may not be covered under your auto insurance.
2. Loss Settlement – As implied above, there may very well be disagreement over the value of the vehicle. The appraisal clause of your auto insurance policy provides the insurer (company) the right to inspect and appraise the damaged property before repair or disposal. The rental company may choose to make the repairs immediately, potentially resulting in a lack of auto insurance coverage because of failure to comply with the appraisal clause.
3. Loss Payment – The rental agreement may require immediate reimbursement for damages and it is not uncommon for the rental company to charge the consumer’s credit card for the full value of the vehicle and other expenses.
4. Loss Damage Waivers (LDW) – The rental agreement usually requires reimbursement for more than collision, making the consumer responsible for ANY “loss” in value beyond normal wear and tear, regardless of fault.
5. Indirect Losses – The consumer most likely will be responsible for the rental company’s loss of rental income on the damaged unit.
6. Administrative Expenses – The rental contract may make the consumer liable for various “administrative” or loss-related expenses such as towing, storage, appraisal, claims adjustment, etc. None of these expenses are typically covered by auto policies.
7. Other Insurance – Coverage under an auto policy is typically excess over: (1) any coverage provided by the owner of the auto, perhaps including self-insured plans, (2) any other applicable physical damage insurance, and (3) any source of recovery applicable to the loss – CDW/LDW, travel policies, credit card coverages, etc. The potential controversy over who pays what is obvious and can result in litigation.
8. Excluded Vehicles and Territories – Personal auto policies typically do not provide physical damage coverage for motorcycles, motorhomes, and other motor vehicles that are not private passenger cars, pickup trucks, or vans, and use of covered vehicles are limited to the US, its territories and possessions, Puerto Rico, and Canada. Additionally, if a consumer is renting a trailer, auto coverage is typically limited to $500-$1500, if covered at all.
9. Excluded Uses and Drivers – Some auto policies may only apply to individuals listed on the rental agreement. This could be an issue if the car is damaged while being valet parked or driven by an unlisted family member.
10. Additional and/or Future Costs – The personal auto policy will include a physical damage deductible that is applicable if the auto policy is providing coverage for the rental car. Additionally, payment for damage to a rental car may result in a significant premium increase on the renter’s auto policy via surcharges or loss of discounts.

All of this to say…we highly encourage all of our clients to purchase the Collision/Loss Damage Waiver provided by the rental company! While you might have coverage in some instances, we urge our clients to err of the side of caution.