Do I Need To Buy Insurance When I Rent A Car?
· by Matt Fox · posted March 14, 2008
· filed under Auto, Personal Insurance category.
When renting a car there is no black or white answer to buying the rental car company’s insurance. Like all insurance, you need to look at the contract, the coverage, and the price to benefit provided. Now, with that said, there is good reason to buy and not to buy certain coverage from the rental car companies.
Liability Coverage - If you don’t carry your own personal auto insurance then you need to buy their liability insurance. This is legally required in most states and will help defend and protect you if you’re at fault in an accident. If you carry a personal auto policy, and are a named insured, then your liability coverage follows you in other autos for personal use (many court cases have held that this applies to U-Haul types and motor homes used for personal use only).
Physical damage to the auto - Here’s where it becomes messy. Physical damage can occur because of “acts of God,” accidents caused by you or accidents caused by other drivers. The rental car company doesn’t make a difference between these. They’re YOUR fault and they require you to pay for things like: loss of rental income, the vehicle’s “full value,” and immediate reimbursement for damages. What does all this mean to you?
Loss of rental income is the money the rental car company could be charging other people if the car wasn’t in the shop being repaired. Since they’re potentially losing money while the car is in the shop; they still want to earn their potential income. This is a hypothetical and your auto insurance does not pay for hypothetical situations.
A personal auto policy only covers vehicles up to “actual cash value” or the amount “necessary” to repair or replace the vehicle. Since you’re signing a contract to insure the vehicle’s “full value” you could fall drastically short if the car is a total loss. If the car you’re driving is one year old with 50,000 miles on it, you’re agreeing to buy them a brand new car with zero miles on it. You have to make up the difference personally because your auto policy will only pay to buy them another one year old car with 50,000 miles on it. This could mean thousands of dollars out of your pocket.
When you sign the rental car contract, you’re agreeing to immediately reimburse them for any damages. Your auto policy can take days to adjust a claim and finish the process. The moment there is damage the rental car companies will often charge your credit card the amount they think the claim will be and they may begin litigation to receive payment. Even though you gave them “proof” of your insurance they want to make sure they receive some payment for the damage in case your policy just lapsed from non-payment. Obviously, this could cause many problems for you especially if it takes a month to repair the car and now you have to pay your credit card bills.
If you’re renting a U-Haul, motorcycle, trailer or motor home, physical damage under your personal auto policy won’t be covered or is very limited (usually less than $1500 total). You’re best bet is to buy their physical damage coverage!
If you’re renting a passenger car, van or truck on your vacation, should you buy the insurance from the rental car company? That’s up to you. It could be a small price to pay for the ability to simply walk away and never to think about it again.
Comments
Got something to say?