It’s not exactly an ideal situation. You’re at the rental car agency counter, facing the clerk, unsure of the decision you are being forced to make. Do you want rental car insurance? What you are really asking yourself is, do you need rental car insurance?
Standing at the rental counter is not the best time to try and figure it out. After all, you are just beginning a vacation or are on a business trip and need to get to a meeting. The choice is not an easy one – you don’t want to purchase extra auto insurance you don’t need (i.e. already have), but you don’t want to be on the hook for thousands of dollars if something goes wrong. What should you do?
Let’s evaluate your options so that when you stand at that rental car counter, feeling the pressure of the rental car insurance sales pitch, you will know the right choices to make. In the end, you will save both money and time – not to mention needless worrying when there are more important things on your mind (like, which way to the beach?).
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Use Your Personal Auto Insurance Policy
This may be your easiest, best option. Your personal auto insurance policy will cover damage you cause to other property up to your liability policy limit. For damage that you cause to your rental car, you will need collision and comprehensive coverage on at least one vehicle that you have insured. If you don’t have collision and comprehensive, we will look at your options further down in this article.
Your auto insurance policy will also cover you from the rental company’s lost income while their car is being repaired. This coverage is usually subject to a daily limit, such as $25 per day. One important thing to remember is that often personal auto policies will not cover you if you rent the car outside of the U.S. and Canada. If you plan on driving abroad, inquire about rental car insurance with the agency that you plan on renting from.
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Buy Coverage From The Rental Agency
This coverage is referred to as a “collision damage waiver” (CDW). This may be necessary if you don’t have collision and comprehensive insurance coverage and seek to have it while renting a vehicle. The expense of a CDW can run anywhere from $10 - $20 per day. This will cover you in the event of damage to the rental vehicle, but it has many limitations. The CDW is often subject to a daily mileage limit, unlisted drivers are excluded (including spouses), and it is voided if it is determined that you drove carelessly and sometimes if you had any alcoholic beverages (sometimes only one!). The coverage offered by some CDWs pales in comparison to what you receive with your personal auto insurance policy. Some CDWs offer only $35,000 in protection versus $300,000 in your regular auto insurance policy.
Considering these limitations, and the expense of a CDW, if you frequently rent cars, it is not advisable for you to pick up this insurance. But if you are simply taking a vacation and don’t want to expand your personal auto insurance coverage, a CDW might be your best option. Another advantage to using the CDW is that if you have to file a claim, your personal auto insurance rates won’t be affected. This could save you a lot of money in the long term.
In addition to a CDW, rental car agencies also offer other forms of insurance coverage, such as personal injury protection (PIP). These separate coverages can be costly, and can send your rental car costs sky high (adding a possible extra $50 per day). But if you don’t actually have a personal auto insurance policy, this may be your only option. It is better to buy these coverages than to go without.
Use The Coverage Offered By Your Credit Card
Many credit card companies offer rental car coverage if you make the transaction on your credit card. The credit card company will pay for damages you caused to other properties and to your rental car, will reimburse you for a deductible if you choose to use your personal auto policy to pay for the damages, and will cover towing costs.
The advantage here is that you don’t need to take any special action, other than paying for the rental car on your credit card. You don’t need to purchase any extra coverage. There are some disadvantages, however. The credit card company may have limitations similar to a CDW, like daily mileage limits, and the insurance might be voided if you consume any alcohol. Credit card companies may also often implement a limit on how long they coverage lasts – fifteen consecutive rentals days in some cases.
Read The Fine Print
You need to know the limits of your personal auto insurance policy and what the rental car company is offering in order to make the decision. Essentially, this is all about doing a little research. Spend the time before you take the trip (it should only be a few minutes) instead having to make a spur of the moment decision at the rental car counter. This will save you money, time, and will get you to the beach that much quicker.
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