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Does Existing Auto Coverage Cover Car Rentals?

Each year, millions of automobiles are rented all across the United States. Whether for business or for pleasure, many people choose to rent cars as their means of primary transportation upon landing when they fly out of town. The cost of renting a car is not a simple formula based on just one dollar amount. Rental companies offer supplementary rental car insurance for each rental, and usually strongly encourage renters to take them up on this offer. They cite the many forms of coverage included and the ways in which such coverage can protect the renter if anything goes wrong during the rental period, such as a car accident, theft or some type of damage to the rental. But are these supplementary policies for rental cars really necessary? Here we examine whether existing auto insurance coverage typically covers car rentals, and whether spending the extra money for supplementary rental car insurance is really a worthwhile investment.

Reasons to Check into Existing Coverage Options Before Renting a Car

In the majority of cases, car renters do not even think about whether or not they should buy supplementary rental car coverage as part of their rental agreements until they reach the counter to pick up the keys to the rental car. But there are some compelling reasons why renters should take the time before leaving town to look into the other options they have, so that they can avoid the unnecessary expense of buying double coverage.

One important possible avenue of rental coverage worth considering is the coverage often provided by credit card companies on rental cars. Many credit card agreements include language describing a built-in benefit of card membership with respect to car rentals. In many cases, your credit card company will automatically supply you with some form of rental car coverage if you pay for your rental with your card. The coverage included in these agreements typically includes damages to rental cars suffered during the rental period. But the credit card coverage for rentals usually does not include coverage for any other vehicle or property damaged by the rental car, and it often is limited to certain makes and models of rentals (normally lower-cost rentals). This coverage also might be primary or secondary in nature, meaning it may only kick in after all other coverage types (including your personal auto insurance) have been applied and exhausted. Even so, it is still well worth looking into the specifics of any rental car coverage you already have with your credit card company.

Another obvious source of possible rental car coverage you need to fully investigate prior to paying for any kind of supplementary coverage is the insurance for rental cars provided by your own personal or commercial policy. Most standard personal and commercial auto insurance policies contain some kind of coverage for rental cars, and some policies even contain special endorsements for this type of coverage. Before you spend the extra money on your rental car to pay for the supplementary coverage offered by the rental agency, take a close look at your own coverage. You may very well find that you have no need for supplementary coverage in your specific situation. Alternately, you might be surprised at certain limitations of coverage you were not previously aware of. Either way, it behooves you to do the reading on your own auto insurance policy with respect to rental coverage so you can make a well-informed decision when you reach the rental counter and prepare to sign the agreement.

Types of Supplementary Auto Coverage Offered by Car Rental Companies

If you do your homework and find that you really do have a coverage gap when it comes to the rental car portion of your personal or commercial auto insurance policy, the next step is to look at the different types of coverage offered by rental car agencies. There are four basic types of coverage offered in some form or another by rental car companies, and each of them should be considered individually as part of your overall supplementary rental car insurance package.

The first type of coverage deals with damage to the rental car itself. It can take the form of a collision damage waiver (CDW), loss damage waiver (LDW), or physical damage waiver (PDW). Basically, electing any of the three enters you as a renter into an agreement with the rental company. Your end of the bargain is to pay a predetermined daily amount on top of the basic rental cost of your car. In exchange, the rental company agrees to waive its right to pursue financial compensation from you in the event that the car is damaged or stolen during the rental period.

The second type of coverage focuses on personal liability protection. Sometimes called a Liability Insurance Supplement (LIS), this type of coverage is advisable if you do not have existing liability coverage in a personal or commercial insurance policy, or if you wish to increase your liability protection during the rental period for any reason. Rental car supplemental liability protection pays out in liability situations that exceed the limits of your existing personal liability coverage on your personal or commercial auto insurance plan.

The third coverage type is accident protection, sometimes referred to as personal accident insurance (PAI). This provides a one-time payment for you or a passenger in your rental car in the event of death or maiming from a car accident during the rental period. The fourth and final type of coverage deals with personal property protection. Personal effects coverage (PEC) or personal property insurance pays out if something is lost, stolen or destroyed in your rental car during the covered rental period. This kind of coverage is particularly worth considering, because standard personal auto insurance plans do not include provisions for loss of personal effects. If you have homeowners or renters insurance, examine the language describing personal effects coverage to find out if these policies already contain this specific coverage [1].

Be Prepared to Make Wise Choices at the Car Rental Checkout Counter

As you dig in and do a little reading on the topic of supplemental rental car insurance, bear in mind that while the extra coverage available may prove quite valuable, it could just as easily end up being a waste of money. The person working the front desk at the rental agency you're working with knows nothing about the specifics of your personal or commercial policy, only the mandates they have to try to sell add-on insurance coverage to each customer who walks in the door.

One additional tip to keep in mind as you are weighing your rental car coverage options: some travelers find it worthwhile to go ahead and opt for extra coverage even if it overlaps their personal policies, just to try to keep their rates from increasing if they run into a claim situation while on vacation or away on business. All renters must weigh their various options for themselves and decide which one works for them. Taking a proactive stand in the process and becoming more knowledgeable about supplemental car insurance will help you make the right choice.

[1] http://www.bnm.com/insgas.htm Retrieved 2009-12-14.

 

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