Insurance Myth Busted: Do You Really Need Rental Car Insurance?
April showers have come and gone and May flowers have arrived, bringing with them the end of the school year and dwindling countdowns to summer vacations. For many, Memorial Day weekend kicks off vacation season. Whether you plan to fly or drive you may be considering renting a car, which begs the question – do you need to buy that extra coverage at the counter?
“Rental car insurance is a scam – I already have an auto policy!”
While it is true that your personal auto policy coverage follows the rental car, it is important to know what coverage you actually have available to you. For instance, if you have a liability only policy and you hit a deer with your vehicle there is no coverage available. The same is true when you drive a rental car. Should you cause a collision with another vehicle while you are driving a rental, your policy will cover damage to the other vehicle, but leave you to cover the damage to the rented vehicle. In this instance, the fee for additional insurance far outweighs the cost of replacing your rental car.
“I carry Comprehensive and Collision – rental car insurance doesn’t apply to me.”
Full coverage does cover the examples we’ve already covered, but there are still plenty of good reasons to invest in the additional options offered at the rental counter. Two of these are loss of use and diminished value. Imagine that you are involved in an accident in a rented vehicle; your policy, which includes comprehensive and collision coverages, takes care of the damage to the other vehicle as well as paying to repair the rental. Unfortunately, the repairs will take twelve days to complete. Your rental company estimates that the vehicle would have been rented ten of those twelve days, and you are now being charged for loss of use – the amount of money the company would have made if the vehicle had been available. Now let’s imagine that the accident has totaled the vehicle. Your insurance adjuster determines the value of the vehicle to be $7,000. The rental company is able to prove that had the car been available the full amount of time they had intended to keep it in use, they would have made $10,000. In this instance, you would be charged $3,000, or the diminished value of the vehicle. Both of these scenarios are covered by a loss damage waiver (sometimes called a collision damage waiver) – the insurance offered by the rental company.
“Wait…doesn’t my credit card cover insurance on a rental car?”
While it is true that many credit card companies offer some coverage for a rented vehicle, these coverages vary from card to card and may not be adequate. The vast majority do not come into play until you have exhausted the limits of your own policy; some only cover the cost of your deductible. Most credit cards will not cover loss of use or diminished value.
“So I really DO need that rental insurance, don’t I?”
A quick internet search will offer you a resounding no, but it is important to remember that most of the articles available are not written by licensed insurance agents. In fact, many are written by people with no insurance background whatsoever. The best way to be certain that you have adequate coverage is to contact your insurance agent. He or she can help explain exactly what is covered on your current policy, and with you, determine whether or not you would benefit from purchasing insurance offered by the rental company.
“Thanks! I’m all set for vacation now!”
Not so fast! There is more to covering yourself while you’re on vacation than just making sure your auto insurance is up to date! We have more advice available on how to protect your home from theft while you’re away including hiring a lawn service to mow your lawn. Tall grass is often a giveaway that no one is home, leaving you vulnerable to a break in.
Are you covered?
Burkhart Insurance proudly represents a variety of insurance companies, many of which offer endorsements that may offer adequate coverage for a rental. Call one of our fourteen licensed agents at 812-882-3600 for more information today!