Is a rental car covered by my car insurance?
The short answer to this question is, “Yes. Your car insurance policy covers a rental car for the same coverage you have on your policy.” Here are 10 reasons why we think you should buy the rental car insurance anyway.
- The rental agreement may not agree on the value of the car in an accident. Your auto policy, if you have full coverage, covers the lesser of the “actual cash value” of the vehicle or the amount necessary to repair or replace the damaged property. However, the rental agreement may obligate you to reimburse the rental company for the “full value” of the vehicle.
- Claim settlement could be a headache. As implied above, there may be disagreement over the value of the vehicle or the amount charged for labor and materials to repair it. Your auto policy’s Appraisal clause may kick in, with its accompanying costs. More importantly, the insurance company has the right to “…inspect and appraise the damaged property before its repair or disposal.” However, the rental company, unlike you, is not contractually obligated to your insurance company. So, it may choose to make the repairs immediately. This will potentially cause a lack of coverage because of failure to comply with the contract. In any case, purchase of the rental car insurance usually allows the renter to “walk away” without the headaches involved in adjusting an auto claim.
- Your credit card could take a hit. The rental agreement may require immediate reimbursement for damages, and it is customary practice for the rental company to charge your credit card. This can create a significant debt, “max” out the card’s credit limit (perhaps shortening a vacation or business trip), result in litigation, etc.
- It might not matter if you were at fault or not. Rental agreements often make the renter responsible for any loss in value beyond normal wear and tear, regardless of the cause and regardless of fault. In order for your policy to respond, you must insure at least one vehicle for both collision and other-than-collision (often called “comprehensive”) coverage. If not, your policy will not respond to rental car damage and loss of use claims.
- Your policy won’t reimburse the rental company for lost income while the car gets fixed. You will most likely will be responsible for the rental company’s loss of rental income on the damaged unit. Your policy has limited coverage for these charges.
- The rental company may charge administrative costs. The rental contract may make the insured liable for various “administrative” or loss-related expenses such as towing, appraisal, claims adjustment, storage, etc. Some of these expenses may not be covered by the auto policy.
- Dispute over who pays what. Your auto policy says that it is excess over: (1) any coverage provided by the owner of the auto, (2) any other applicable physical damage insurance, and (3) any other source of recovery applicable to the loss—travel policies, credit card coverages, etc. The potential controversy over who pays what is obvious and can result in law suits. In addition, keep in mind that many states have statutes, proprietary policy forms, and/or case law precedents that may govern this and other rental car exposures.
- If you go out of the country or rent a specialty vehicle. The auto policy normally does not provide physical damage coverage for motorcycles, mopeds, motor homes, or other vehicles that are not private passenger autos, pickups, vans, or trailers. In addition, use of covered vehicles is limited to the U.S., its territories and possessions, Puerto Rico, and Canada (the rental agreement may also exclude operation outside a specific geographical area). If you rent a trailer (U-Haul, camper trailer, etc.), coverage is limited to $500.
- You might not have coverage for all of the drivers. Your auto policy may have limitations on use of vehicles that are not otherwise excluded by the rental agreement. Also, the policy may include an exclusionary endorsement for certain drivers or may apply only to designated individuals.
- Additional and/or Future Costs. Your policy will likely include a deductible in the range of $100-$500 or more. In addition, payment for damage to a rental car may result in a significant premium increase (if not nonrenewal) via surcharges or loss of credits.
Although most rental insurance fees are considered unnecessary, we advise you to purchase it for short-term rentals. If anything, this will give you peace of mind while on vacation or business, and it could save you from a lot of inconvenience and lost time and money.
When you rent a vehicle, ask for an advance copy of the rental agreement in order to determine your contractual obligations for damage. Check the websites of the rental companies to find the agreement.
In addition, if you will be traveling abroad, check for information about driving requirements and rental car programs in Europe and other countries around the world.
- Be sure to inspect the rental vehicle for existing damage to the interior and exterior. Get the acknowledgement of such damage in writing before leaving the premises.
- Be sure to take proof of insurance with you on your trip.
- Take photos to document existing damage or damage that may occur while using the vehicle.