One of the most lucrative aspects of a rental car agreement is the car rental insurance offered at the rental counter at the airport. An uninformed traveler will automatically agree to this insurance just to accelerate the rental process. Instead of paying for this daily coverage, decline the collision damage waiver offered by the rental car company and rely on other forms of auto insurance. Prior to departure, follow this guide to determine the need, find a good source, and avoid duplicate car rental insurance.
Determine Need for Car Rental Insurance
Whenever a driver signs a car rental agreement, the rental car company will offer insurance coverage on a daily basis. If any of the following is true, the driver may need the car rental insurance provided by the company.
• No personal car – While most people who are qualified to rent a car have a valid driver’s license, there are many drivers that do not own a personal vehicle. When these drivers travel, they must secure rental car insurance for the duration of the auto rental agreement.
• Liability-only policy – Drivers that own an older vehicle that is covered by a liability-only auto insurance policy should obtain a short-term auto insurance policy to include comprehensive and collision coverage for the rental car.
• Foreign car rental – Some personal auto insurance policies will cover cars that are rented in most foreign countries. The agent should be notified and full details obtained prior to renting a car outside the country of residence. Certain countries carry risk factors that the insurance companies avoid, so research all countries where a car will be rented prior to departure.
• Expensive rental vehicle – Rental cars with a replacement value that exceeds $50,000 will require additional car rental protection. Car insurance companies will sell this additional policy as a secondary coverage to cover costs above the $50,000 threshold.
Sources of Car Rental Insurance
When a driver owns a personal vehicle and carries full coverage on that car, the following sources of insurance may already cover a rental car for any damage incurred during the contract.
• Private insurance policy – When a driver carries full coverage on a personal vehicle, the personal auto insurance policy would cover the repair costs up to the limits on the policy. The liability insurance on the same policy would cover damage to the property belonging to someone else.
• Credit card company – Most credit card companies offer various levels of car rental insurance coverage for the duration of the rental car agreement when the rental fee is paid with their card.
o The American Express card offers the most extensive coverage when the driver pays the $24.95 fee per car rental. This Premium rental car coverage through American Express provides a Collision Damage Waiver, which covers any damage to the vehicle. Items inside the vehicle are not covered under this policy.
• Short-term auto insurance – One of the most innovative auto insurance policies is the short-term policy that covers the driver and the rental car for terms less than ninety days in duration. Many online companies issue these policies with approval taking less than one hour. Coverage limits are set by the applicant and options are provided for comprehensive, collision and liability insurance to be added to the policy. Contents insurance can be purchased for all personal belongings that are in the car.
• Foreign auto insurance – When traveling to countries that are exempted from the personal auto insurance coverage, a foreign auto insurance policy must be purchased. At least personal liability coverage should be purchased, but full coverage would be prudent to provide sufficient car rental protection.
• Rental car company – Renting a car at the last minute might be one instance when the insurance provided through the rental car company should be purchased for the duration of the rental car agreement. Daily rental fees can increase the cost of the contract by 25 percent or more. When the driver is uncertain if the car would be covered by the other sources and the rental is just for one or two days, the best decision might be to purchase the coverage and mitigate the risk.
Avoid Duplicate Car Rental Insurance
If the driver owns a personal vehicle and is traveling on business for his employer and used a company-issued credit card, the following sources will cover an accident in a rental car in order:
• Business coverage – Many large companies with employees that travel will carry additional insurance policies to cover all rental car agreements in every country where travel occurs. These car insurance policies are meant to leverage the coverage across many drivers and reduce the car rental fees. This policy would provide primary coverage in the event of an accident.
• Credit card company – Companies provide credit cards to upper level managers and executives that travel often. Whenever a rental car fee is charged to the credit card, the car insurance option is automatically applied to the rental car agreement. This coverage is secondary to the business coverage if it exists.
• Personal auto insurance – Whenever a business traveler signs a rental agreement, their own personal auto insurance coverage acts as the final layer of coverage for the rental car. Only after all other sources of insurance have been exhausted would the personal policy be tapped for coverage.
In this situation, substantial insurance coverage protects the rental car from damage and will pay for repairs or complete replacement of the car. The value of the rental car might require additional coverage, but these cases are rare. Any rental car valued at more than $50,000 must be covered by additional insurance, which is usually issued by the rental car company.
Once adequate car rental insurance has been obtained, the rental agreement is signed, and you are approaching the car in the lot, seriously evaluate the condition of the car. Part of the rental agreement is a sheet of paper with a car diagram on the page. Walk around the car and mark the diagram where every scratch and dent already exists on the car. Failure to take this step can lead to claims by the rental car company against any car insurance you obtained to cover the rental car. When you return the car, the attendant will evaluate the car for new dents and scratches. If the original sheet is marked, you are protected against accusations that you have damaged the car during the rental.