Rental car companies are notorious for selling expensive “insurance” designed to protect the renter if a vehicle is damaged, lost, or destroyed. The fact is, rental car insurance isn’t really insurance at all – it’s a contractual agreement known as a collision damage waiver.
A collision damage waiver basically says that the rental company will not pursue you for covered damages to the vehicle that occurred during your rental period. While purchasing the collision damage waiver could spare you financial headaches after a collision or other covered event, this type of protection might not be as essential as it would seem.
Is Rental Car Coverage Worth the Cost?
What would happen if you hit a deer with your rental car? What if a thief stole the vehicle from the parking lot of the hotel you are staying at? In these scenarios, the collision damage waiver from the rental car company might pay for the loss at no out of pocket cost to you. This not only prevents you from filing a claim on your personal insurance, but it also saves you hundreds of dollars towards the cost of your deductible. This alone might validate the relatively high cost of the collision damage waiver, which can boost the cost of a car rental by as much as 60 percent.
On the other hand, collision damage waivers may also hold many exclusions that void their coverage. Depending on the terms of the waiver, your actual financial responsibility could be at the rental car company’s discretion. For example, the waiver may not apply if the accident you are in is caused by excessive speed and carelessness. Likewise, you might still be personally responsible for replacing a stolen vehicle if you left the doors unlocked and the ignition key inside of it.
Despite the pressure, you may feel from a rental car company to purchase their in-house protection, remember that collision damage waivers are optional and that you probably have alternative coverage options available to you:
Credit Card Companies
All four of the major credit card companies have cards that provide some level of coverage for damaged rental vehicles that were reserved and purchased using a particular credit card. Though the coverage will vary, you can check with your credit card issuer to find out how to take advantage of this free protection. Keep in mind that debit and pre-paid cards do not typically offer any coverage.
Personal Auto Insurance
Your personal auto insurance coverage will likely transfer to other vehicles you drive, including a rental car. You will probably need collision and comprehensive protection to take advantage of this benefit, and you may still be responsible for paying your deductible if you file a claim.
Personal Umbrella Insurance
A few umbrella insurance companies – but not most – provide limited coverage for damage to rental cars. There may be restrictions on which rentals are covered, and you may still be responsible for paying a SIR (self-insured retention) toward the cost of the damages.
Keep in mind that there is much more to be concerned about after an accident than the rental car. In many cases, there is also damage to another person’s vehicle or property, as well as injuries. Collision damage waivers do not typically include coverage for anything other than the rental car company’s losses. All other losses and liabilities may still be your financial responsibility.
Take it. While there may be some overlap in coverage, there will also be some gaps. And while the cost may seem expensive compared to the overall cost of the rental, it can be money well spent if you do have an accident.
If you have questions about your personal or business insurance, give us a call at Wolfgram Insurance. We’d be happy to help.