Rental Cars and Insurance Coverage

| January 28, 2010

Often times drivers will decline or accept insurance coverages offered by car rental companies without fully understanding the consequences. Before walking into the car rental facility there are a few things you should know to help you to make wise insurance choices when renting a car.

Business or Pleasure

The supplementary insurance coverages available at the time of rental differ depending on whether the car is being rented for personal or business use. A business auto policy responds much differently to a car rental than does a personal auto policy.

Car Rental for Pleasure

The personal auto policy is the first supplementary line of defense when renting a car. If you (the car renter) do not own a automobile or are not otherwise covered by a personal automobile policy, then you should purchase the insurance coverage as offered by the car rental company.

A car owner, on the other hand, has a personal auto policy and is in a better position to accept or decline coverage offered by the car rental company. Before making a decision, however, the review the personal auto policy to make sure your policy contains adequate liability limits and physical damage coverage to meet the rental company requirements.

Keep in mind that personal auto policies that do not have physical damage coverage (comprehensive and collision) will not provide physical damage coverage for a rented car. In that case, it is wise to accept and pay for the collision damage waiver being offered by the car rental company.

Coverage through Credit Card Company

Credit card companies provide a possible insurance alternative for those not covered under a personal auto policy. Although credit card companies offer some type of insurance protection when it comes to renting cars, there is no set standard. To understand just how much protection they offer, it’s best to call the credit card company for coverage details. Credit card companies usually provide coverage in excess of any existing coverage.

Renting a Car for Business Use

When renting a car for business, make sure the business auto policy contains Non-Owned and Hired Car coverage. Non-Owned and Hired Car coverage is a liability only coverage. It will not pick up the cost to repair damages to the rented car. Corporations usually address the physical damage exposure on rented vehicles in a couple of ways:

  1. Purchase the Collision Damage Waiver: Many companies encourage employees to purchase the collision damage waiver. When signing the waiver, be sure to list the names of all individuals who will be driving the rented car. Not listing the drivers and paying the appropriate fee per driver may void coverage in the event of an accident involving a driver not listed on the waiver.
  1. Credit Card Coverage: Similar to renting a car for pleasure, some credit cards offer coverage for business rentals. It’s best to check with the credit card company to find out what is provided before renting the car.

Collision Damage Waiver

The collision damage waiver is not insurance. Collision damage waiver is just as the name implies, a waiver. The collision damage waiver absolves the driver from being financially responsible for damage to the vehicle (including theft). It also waives the cost of the rental company’s loss of use while the vehicle is out of commission.

These waivers may be voided if the damage to the rental car was caused by speeding, drunk driving or other risky behavior.

Keep in mind that the collision damage waivers only covers the cost of damages to the rental car. If a the rental car driver gets into an accident which causes damage to someone else’s car or property, the collision damage waiver will not pickup the cost of the third party damage.

Take Your Time

When it comes to renting cars, most people are in a hurry. Once they get the rental of their choice, they want to sign the papers and get on their merry way. Take a few minutes to read what you’re signing. Not doing so could prove to be costly.

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Category: Car

About the Author ()

Felicia A. Williams is a wife, mother, freelance writer and owner of Tidbits and Stuff.

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