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Rental Car Insurance Coverage

Rental Car Insurance Coverage

Does your auto insurance cover an accident in a rental car? Or, are you putting yourself at risk by not purchasing rental car insurance coverage?

If your family is joining the ranks of the thousands of others all across New England who take advantage of the February, March or April school break weeks to go on a vacation, then these questions could potentially be looming in your future.

Right now, you might be in the midst of getting your family ready for an exciting adventure, and probably have a long checklist of things to do to prepare for this trip. Those endless to-dos very well may include renting a car.

A rental car can be a smart choice for family travelers who want the freedom and flexibility to explore a destination spot that they’ve reached by plane, train, or cruise ship, or for those brave souls who have decided to be road warriors but don’t want to put the miles and wear and tear on their own car.

A photo of a family posing for a photo before picking up their rental carHowever, that doesn’t mean that the rental car process will be easy or quick. Since you are renting during peak travel season, you might want to bring along your patience when you head to the rental car office or counter. Wait times for service or a car can sometimes stretch to several hours — not to mention that once you finally get up to the rental counter, you need to steel yourself for a barrage of questions and sales pitches from the representative.

At ICNE, we are glad to provide advice to clients on how to handle some of the questions you often get at the rental car counter, including the one that makes most travelers bristle: “Would you like to purchase additional insurance coverage?”

We know that most people decline this option, believing that their own auto insurance or credit card company provides coverage that will suffice if they have an incident, like a crash, theft, or break-in, with their rental car. But before you put your virtual signature or handwritten initials on the “Declined Insurance” line of your rental car contract, we want to make sure you understand everything that your own auto insurance may cover, and what it may not.

Do you need rental car insurance coverage from the rental car company?

As the representative at the rental car counter reviews all of your rental paperwork, you will inevitably arrive at the part of your contract where you have to decide if you want to purchase additional insurance coverage. It helps if you understand what you would get with the four general options that companies offer renters:

  • Personal Effects Coverage (PEC) reimburses you for any personal property that is stolen from your rental vehicle.
  • Collision Damage Waiver (CDW)/Loss Damage Waiver (LDW) relinquishes you of any responsibility for damage to or theft of your rental car. It also protects you from having to pay the rental car company for “loss of use” of their vehicle, or the rental income that they are missing out on every day their vehicle is out of service and could have been rented.
  • Supplemental Liability Coverage (SLC) provides liability coverage up to $1 million.
  • Personal Accident Insurance (PAI) provides medical and accidental death benefits if you or your passengers are injured or killed in an accident.

Investing in all these coverages can add at least another $50 per day to your rental car bill. So, is it worth paying this extra cost? Or are you already adequately covered for damages, injuries, theft, and liability under your own car insurance policy?

The answer, unfortunately, isn’t black and white. It depends heavily on what your own personal insurance policies currently have for coverage, deductibles, and limits. That’s why it’s important to consider the following five key points about your personal insurance before you decide whether to shell out the extra dollars for any of the added protection options the rental car company offers:

The personal property coverage in your home or renters insurance policy should extend to personal items that you leave in your rental vehicle

However, this doesn’t mean that the personal effects coverage (PEC) offered by the rental car company is completely unnecessary. Yes, homeowners, condo and renters insurance all do include coverage for personal belongings that are stolen not only from your home but also from your car, whether it’s your own or a rental. But, it’s important to note that this personal property coverage comes with a deductible – typically $500 for renters and $1,000 for home/condo – and limits how much you can claim for specific items. To ensure that any belongings stolen from your vehicle would be covered at their full value and that you don’t have to pay your deductible first, you might want to explore the personal effects coverage from the rental car company. Or, you could look into adding a personal belongings coverage endorsement to your auto insurance policy. Not all carriers offer this option, but if yours does, it might be worth adding it to your policy as an extra layer of protection for any stolen items, and for your wallet.

The coverages in your auto insurance policy, including collision, comprehensive, liability, and personal injury protection (PIP), should extend to your rental vehicle

For example, if you and your family are driving through the winding scenic roads of Acadia National Park in your rented mini-van and end up in a fender bender with another sightseeing family, then the collision part of your auto insurance policy should cover the cost of repairing the damage to your vehicle. In a more catastrophic incident, where your car is totaled, then your collision coverage should pay to replace the car. In the same vein, if your rental car is stolen, then the comprehensive coverage from your policy should kick in to pay for a new car. And if you or any of your loved ones are injured in an accident, then your auto policy’s personal injury protection coverage should help cover the medical costs that your health insurance does not.

There’s a caveat, though — these scenarios only work out in your favor if you have adequate levels of protection on your current auto insurance policy. For example, if you’re a Massachusetts driver and your auto insurance coverage only meets the state’s minimum requirements, then you don’t even have collision or comprehensive on your policy right now, and you also have very low limits for liability and personal injury protection. If this is your situation, then it might be wise for you to look into purchasing one or more of the coverages offered by the rental car company to avoid a scenario where you have to pay thousands of dollars in accident- or theft-related damages and injuries out of your own pocket.

Even if you have adequate auto insurance coverage, you will still have to pay for any deductible on your policy

The collision and comprehensive coverage on your auto insurance policy typically has a deductible, which means that you will not be free and clear of financial responsibility if your rental car is damaged, totaled or stolen. Before you receive any payout from your insurer, you will have to pay your deductible, which generally ranges from $500 to $1,000 or more, depending on your particular policy details. If your deductible is towards the higher end, then you might want to review the collision damage waiver option from the rental car company because it often comes with a lower deductible than a standard auto insurance policy.

While its vehicle is out of service, the rental car company will want to be reimbursed for “loss of use” expenses

If you get in an accident with your rental car and it ends up in the shop for repairs, you might think that your daily rental fees will be forgiven. Unfortunately, the truth is that rental car companies will make you continue to pay the daily rental fee, not just for the time period that you had reserved the rental car, but for every single day that the damaged vehicle is unusable. However, if you purchase the collision damage waiver from the rental car company, then you would most likely be exempt from these charges as well as any costs related to towing the vehicle or the company’s administrative fees, all of which are typically not going to be covered by your auto insurance policy.

If you are traveling outside of the United States, U.S. territories, and Canada, then your auto insurance coverage will typically not extend to your rental car

While it might be thrilling to travel abroad with your family, it also comes with many challenges, not the least of which is that your auto insurance protection probably will not apply to your international car rental. So if your family adventures are going to take you places far and wide, it’s generally smart to buy the extra insurance coverage options from your rental car company. This will mean that you have financial protection in the event of an accident, which is more likely to happen in foreign countries that often have different driving conditions and traffic laws. In addition, in the event of an incident with your rental car, having the rental company’s insurance in place will help you avoid the enormous hassles of filing a claim in a different country. Also, for additional peace of mind, and extra liability protection while traveling abroad, it might be worth talking to your insurance professional about the benefit of having an umbrella policy.

ICNE helps you determine if rental car insurance coverage is right for your traveling family

Perhaps the rental car insurance information that we’ve shared has you thinking that it might not be a bad idea to invest in a couple of the additional insurance coverages that the rental car company offers. However, before you make this commitment, the team at ICNE suggests that you do a little bit more research on your options by contacting your insurance professional and your credit card company.

Many travelers have been pleasantly surprised to find that the credit card they are using to pay for their rental vehicle includes a free loss damage waiver coverage option. Because every credit card company has its own distinct policies, make sure you check with your issuer about how to qualify for this coverage, and to find out if there are any limits and stipulations on this offer.

We also recommend contacting a local insurance professional, like ICNE, to get a complimentary review of your current auto and home or renters insurance policies. Our team can quickly help you identify any gaps in your coverage, like not having collision or comprehensive, that could increase the risks associated with renting a car while on vacation.

With everything you have on your plate when getting ready for this big family vacation, we understand that it might seem like a crazy time to update your personal insurance policies. But by spending just a little time with us before you hit the road or take flight on vacation, you are much more likely to be able to spend all of your vacation budget on having lots of family fun rather than on your rental car.

If you are ready for a more personal relationship with a trusted insurance agent who cares about protecting you and your family, call us today at (800) 243-8134 or stop into either of our two convenient Massachusetts offices.

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