When I rent a car, do I need to purchase their insurance?
This is a complex question that takes some thinking. I’m going to break it out by sections:
Liability pays for the bodily injury & property damage you cause to a third-party for your actions or inactions. Generally, auto policies will provide liability coverage for temporary substitute autos, and most insurance companies look at a rental auto as a temporary substitute. You should check with your agent to be sure coverage applies in your situation. Keep in mind, you only will have liability coverage for the temporary substitute auto equal to that on your auto policy.
PHYSICAL DAMAGE (Comprehensive and Collision)
As is the case with liability, many insurance companies will extend the broadest physical damage coverage you purchased on an owned auto to a temporary substitute auto. In layman’s terms, this means that if you have Comprehensive and Collision Coverage on one of your vehicles, coverage to a rental may extend with the same deductibles you selected on your auto policy.
However…and this is a BIG HOWEVER, there are two things you agree to through the rental contract that are NOT COVERED! Those two things are:
- Diminution of Value – This is loosely defined as the loss in value of a rented auto due to a collision you had while operating that auto. By the terms of the rental contract you are agreeing to indemnify (or pay) this value regardless of who is at fault for the accident.
- Loss of Rents – By the terms of the rental contract you are agreeing to pay the vehicle rental rate of the damaged auto from the time it is damaged until it can be fixed and returned to service. This can be several weeks, depending upon the severity of the accident.
There are two ways to protect yourself from the above. They are:
- Some credit card companies provide coverage for diminution of value and loss of rents as part of their cardholder agreement. Check with your credit card company to see if this is a benefit afforded to you. If so, you should consider paying for the rental car with that particular credit card.
- Purchase the physical damage insurance from the rental car company.
There is one last item to consider when evaluating the need to purchase physical damage coverage from the rental car company. That is your time. Assume for a moment you are covered by your auto policy and your credit card company, and your vehicle is struck in the parking lot of a local retailer.
If you are gone on a short vacation you are going to lose a day of time dealing with adjusters trying to settle the loss. Had you purchased the physical damage from the rental company the process is generally much simpler…you give them the keys and move on.
Clearly if you are renting for many days the cost of purchasing the coverage could become prohibitive. That is why it’s important for you to talk with your agent prior to your trip, explain your scenario, have them look at your existing policy, and allow them to help you make the decision that is best for you.
This blog is written in general terms and is not to be construed as professional advice. Check with your agent or insurance company to learn how your auto policy would respond in your given scenario.
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