Rental Car Insurance: What Does it Cover?

Every time we make our way to the car rental counter, we’re forced to make a split-second decision as to whether or not to take out additional rental car coverage. While some people decide to save their money and take their chances, other are firm in their decision to never leave the lot without first making sure they’re adequately covered with a substantial amount of rental car insurance.

If asked, many people would probably admit that they’re not really sure what rental car insurance covers. There’s also confusion as to why it’s really necessary to have it; after all, if you’re a legitimately-licensed driver, you should already be insured, and your existing policy should cover these contingencies.

Unfortunately, there’s no time to go over all these questions at the rental car counter, and drivers are left to make a quick decision based partly on knowledge, partly on instinct, and dictated a great deal by budgetary concerns.

In a recent survey, the National Association of Insurance Commissioners asked 632 insurance customers what they knew about rental car insurance. According to the results, 42 percent of these customers had very little knowledge about what they were purchasing, or what exactly would be covered.

That’s why it’s crucial to understand a few facts and educate yourself about rental car insurance before you take your next trip.

Collision Damage Waiver

A Collision Damage Waiver (CDW) frees the renter of the car from any responsibility for car loss or damages during the term of the rental agreement. Since this insures the vehicle for its full value, it releases the renter completely from any resultant damage costs.

In order for this to remain intact, however, the renter must not violate any of the terms to the rental agreement. For example, if a renter takes a car off-roading and this is explicitly forbidden in the rental contract, then the CDW contract will be nullified and the renter will be responsible for any damages incurred.

Personal Effects Coverage

Personal Effects Coverage (PEC) offers protection when something is lost or stolen from a rental car.

Personal Accident Insurance

Personal Accident Insurance (PAI) covers the costs incurred in case of medical trauma or death caused by an accident. This insurance covers not only the renter, but any passengers in the rental car as well.

Additional Liability Insurance

Additional Liability Insurance (ALI) offers protection if claims are made against the renter by a third party; these claims may involve either property damage or physical injury and death.

While all of this coverage may seem essential for any car renter to have, it’s crucial for renters to understand that you can actually have too much insurance. That’s because, depending on your own personal car insurance policy, you may already be covered for a lot of these contingencies.

Before planning a trip, you should always go over you own car insurance policy and see what your benefits and deductibles are. You also need to see if rentals are included in your policy; if they are, there may be limitations involving how long you’re renting the car or how many miles you’re putting on it. Likewise, there may be limitations that only exist in certain states.

If you can’t get the answers you need, call your primary insurance provider. You may want to find out answers to the following questions:

• Do I Already Have Collision Damage Waiver Insurance?

First, it’s important to remember that CDW coverage does not include liability protection in case a lawsuit is brought against you; CDW coverage only involves vehicular damage or loss. With a CDW, you’re basically paying the rental car company a small fee so that they’ll cover all the costs in case of theft or damage. Because of this, there may or may not be provisions in your own personal auto insurance that would actually cover this contingency.

Credit card accounts also offer some CDW protection for their cardholders, as long as they use that specific card for the car rental costs. Likewise, there may be a special insurance program that the cardholder will need to be enrolled in first in order to get coverage. Visa, American Express, MasterCard and Discover all provide some level of coverage, so it’s best to be aware of whether or not you’re covered before you decide which card to use.

• Do I Already Have Personal Effects Coverage?

If you already have either renters insurance or homeowners insurance, then you likely have coverage for personal effects lost or stolen from a rental car. Nevertheless, it’s a good idea to check with your primary insurance company to make sure about this one, especially since there may be a deductible you don’t know about.

• Do I Already Have Personal Accident Insurance?

If you already have a good health insurance policy or medical coverage on your personal automobile policy, then you should be adequately covered.

• Do I Already Have Additional Liability Insurance?

Any good auto insurance policy is going to include additional liability coverage; this should continue to protect you even if you’re driving a rental car. Make sure, however, that you do have enough liability coverage on your existing policy; standard liability coverage usually offers protection for up to $1 million.

Even if you think you remember the details and deductibles of your policy, you should still check with your primary insurance provider before you travel. Likewise, your insurance representative may be able to tell you of necessary policy upgrades you can purchase before your trip. If possible, find out well in advance so that these upgrades have time to be implemented before you go.

The most important thing to remember is that you can’t ever assume that you’re already covered. When it comes to accident, loss and liability protection, you need to know for sure.

If you’re looking to find your own personal auto insurance, our website has a great guide to auto insurance that will help you out!