Be Sure About Rental Car Insurance

This summer, whether you’re driving for business or pleasure, you may want to rent a car. If so, you’ll likely be driving an unfamiliar vehicle on unknown roads. What’s more, you’ll encounter other (perhaps many other) motorists in similar circumstances. You can’t overlook the chance you’ll be involved in an accident. 

Obviously, your first priority is to avoid injuring yourself, your passengers, and any others. Still, you’ll also want to minimize your financial exposure, so it will pay to have the right insurance in place.

Protection begins at home

Your first line of defense lies in the coverage you already have. Check your auto insurance policy and your excess liability (umbrella) policy to see what—if anything—they say about rental cars.

            Call your insurance agent to double check. If there is coverage, see if there are exclusions for rental cars. Does the coverage apply to long-term rentals or to rentals in a foreign country you may be visiting? If traveling for business, ask how that affects your coverage.

            If you feel your coverage is inadequate, your agent might be able to offer you additional insurance for car rentals. Weigh the added cost versus the extra protection you’ll get. Remember, your greatest exposure might be liability, if you injure someone while driving the rental car.

            After discussing your plans, send an email to the agent, summarizing the conversation, and have the agent respond, so you’ll have a record of what you were told.

Credit check

Besides your existing policies, you also may have coverage from your credit card issuer.

            Example 1: Howard Green rents a car and puts the charge on his Visa card. He skids off the road in a rain storm and causes extensive damage to the vehicle. Some or all of the repair costs may be covered by Visa. Indeed, if Howard has to pay a deductible amount under his personal auto insurance policy, his credit card coverage may reimburse him for the outlay. In some cases, credit card insurance can provide secondary coverage, paying claims beyond the limits of your primary auto insurance policy.

            Again, it pays to read the fine print. To determine what a given credit card will pay, enter the full name of the card and “rental car insurance” into an Internet search engine, such as Google. Be sure to be precise in designating the type of card you have (gold, platinum, etc.) because different cards from the same company may have different levels of protection. With Visa or MasterCard, there can be variations in coverage from one issuing bank to another.

            Credit card coverage can be valuable, especially if it’s included in the basic card member services at no extra charge, but it probably is not absolute. Often, this insurance applies to vehicle damage or theft, but not liability for injuries. In such cases, be sure you have other protection for any liability incurred while driving a rental car.

            Be wary of any exclusions in the coverage you receive from your credit card company. Coverage might not be available, for instance, for rentals of recreational vehicles, rentals of very expensive vehicles, rentals by students, or rentals much longer than 15 days.

            The bottom line is that you almost certainly will use a credit card when you rent a car. You might as well see which of your cards has the best suite of free car-rental benefits, in sync with your auto insurance, and use that card when you rent a car.

Counter moves

When you rent a car, the person behind the counter will ask you if you want the optional insurance offered by the company. The stated cost—often X dollars per day—may seem modest but in fact the annualized costs generally are much greater than you’d pay for standard auto insurance.

            Why would you pay for this expensive coverage? If you haven’t fully researched your insurance options, you might want to buy some coverage from the car rental company, for peace of mind. Alternatively, if you are informed about your present coverage, you might choose some of the optional choices to fill in any gaps.

            Example 2: Mindy Carter lives in New York City without a car, so she has no auto insurance. When she goes away on weekends, she rents a car. Mindy knows that her credit card covers damage and theft but not liability for injury to others. Therefore, she buys liability insurance at the car rental counter.

            Similarly, drivers with little or no collision damage coverage on their personal cars might buy this insurance from the rental company.

Even More on Rental Car Insurance

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