Clarke & Sampson Blog

Should I Purchase Rental Car Insurance?

Posted by Bill Howard

Sep 27, 2013 12:03:00 PM

Reasons Why You Should Not Purchase Rental Car Coverage:

  1. You May Already Have Liability Insurance - Liability coverage is provided from your personal auto policy subject to the same liability limits you have on your policy.
  2. You May Already Have Physical Damage Insurance - Physical Damage coverage is provided from your personal auto policy (if you have physical damage coverage on your personal vehicles).  Coverage is subject to the same deductibles as are on your auto policy.  You must make sure that you have collision and comprehensive coverage on one of the vehicles on your personal insurance policy.
  3. Cost - You do not have to pay the daily insurance fee to the rental car company. Daily loss damage waiver fees can be substantial (upwards of $28 per day).  There may also be fees for adding additional drivers to the contract.
Reasons Why You Should Purchase Collision Damage Waiver or Loss Damage Waiver Coverage:

  1. Loss Valuation – some rental contracts obligate the insured to reimburse the rental company for the “full value” of the vehicle.  The personal auto policy will pay the rental company of the “actual cash value” of the vehicle or the amount “necessary” to repair or replace the vehicle.  There could be a gap in coverage here.
  2. Loss Payment – The rental agreement may require immediate reimbursement for damages and it is not uncommon for the rental company to charge your credit card.  This inconvenience would be avoided if you purchase the coverage from the rental company.
  3. Indirect Loss – You will most likely be responsible for the rental companies loss of rental income on the damaged vehicle.  Personal auto policies have caps on how much coverage is available for indirect loss. 
  4. Diminution of Value – If you damage the rental vehicle, the rental company may charge you for the diminished value of the vehicle.  This claim is very subjective as the diminished value is actually never known until the vehicle is repaired and sold.
  5. Vehicle Use – The personal auto policy provides no physical damage (comprehensive or collision) coverage for the business use of nonowned pickup trucks or vans.  If the rental is for business use you will want to purchase coverage from the rental company.
  6. Deductible – When you purchase a LDW no deductible will apply.  If you file the claim under your personal auto policy you will be subject to the deductible that is on your policy.
  7. Premium Increases – Personal auto policies are subject to premium increases if the company pays more than a specified amount for a claim.  If you purchased the LDW you would not have to submit the claim to your personal insurance company.
  8. Before and After – If the vehicle is damaged and not repairable the rental company will sell the vehicle for salvage value.  They will then charge the renter the difference between the market value of the day of the rental (before the accident) and the amount the car brought at the salvage auction (after the accident).
  9. You Don’t Have a Personal Auto Policy – If you do not have a personal auto policy or if your only vehicle is owned by another party (such as your company) you would not have coverage to fall back on.  If you do not have a personal auto policy with comprehensive and collision coverage you should purchase the LDW.
   With the Loss Damage Waiver the rental company will waive its right to hold the renter responsible for damage to the vehicle.  However watch for wording that will void this waiver such as:
  1. Reckless or intoxicated use of the vehicle
  2. Driving off paved roads
  3. Theft when the keys are in the vehicle and unauthorized use of the vehicle (is the valet an authorized user of the vehicle? – careful)
  4. Unauthorized Use.  Anyone other than the listed authorized user on the agreement. 
  5. Intentional damage or aid in the theft of a car
  6. Operation of the car in Mexico
  7. Use of the vehicle by anyone:
    1. Under the influence of alcohol or drugs
    2. In the commission of a crime
    3. To tow or push anything
    4. In a speed contest
    5. If car was obtained by fraud or misrepresentation.
If you do not purchase the LDW from the rental company - you may be responsible for some losses not covered by your own personal auto insurance If you do purchase the LDW from your rental company – be aware of circumstances where this waiver may be voided. IMPORTANT:  If you allow a rental car to be driven by an unauthorized user (whether family member or not), the rental car Loss Damage Waiver will be voided.  Your personal insurance policy will not respond either.  Please be careful who is driving the rental car. 
NOTES:  TYPE OF VEHICLE:  Please notify us if the rental is a vehicle other than a private passenger vehicle.  This would include U-Haul type trucks or trailers, Camper Trailers, Motorhomes, etc.  You will want prior confirmation from the insurance company for coverage on any of these vehicle types. 
GEOGRAPHIC COVERAGE:  Coverage under your personal automobile policy is limited to the United States, its territories and possessions, Puerto Rico, and Canada.  If you are considering operation of a vehicle outside of this territory please notify us as coverage under your personal auto policy would not apply.
LONG TERM RENTALS:  For long term rentals, periods in excess of 30 days, you should endorse the vehicle onto your personal auto policy.
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Topics: Personal Insurance, Rental Car Coverage