You are on vacation and excited about all of the places you intend to visit. You’ve reserved a rental car, a fancy one because you want to look great while touring the scenes. As you are in the process of checking out, the associate for the rental car company asks if you want to purchase the insurance offered by them. What do you do?
Rental car companies offer a variety of “insurance” options which you can choose from for an additional fee. If you read some of the articles on the internet, they will tell you that if you have a personal auto policy you should save your money because your auto policy or even your credit card company will cover you. The problem is this is not altogether the best advice.
Let’s take a look at some of the coverage features provided with a Florida personal auto policy to see where the gaps might be when you rent a car. Remember, the coverage and limits on your policy are what will be afforded if you are in an accident or return the rental car damaged.
Liability (Bodily Injury and Property Damage)
Liability follows the named insured, resident spouse and “family members” while they use any vehicle. The policy states coverage is provided for the “ownership, maintenance or use of any auto or trailer.” That seems pretty comprehensive. Right?? Well, wait a minute because there are a couple of other questions you need to ask yourself. What is the purpose for renting the vehicle? Personal or business use? If the rental vehicle is for personal use, liability coverage applies for the rental of any vehicle with four or more wheels designed for road use. This includes the box truck moving vehicles. If the rental vehicle is for business use, the liability on your personal auto policy only applies to private passenger autos, pickups or vans. How long will you be renting the vehicle? Depending on your insurance company, anything over 15-20 days might fall into the “furnished for regular use” exclusion.
Personal Injury Protection (PIP)
PIP coverage would be afforded while renting a vehicle with four or more wheels designed for road use anywhere in Florida. Let’s stop here for a minute. The key part of the last sentence is “anywhere in Florida”. If you read my blog about PIP (The Personal Auto Insurance Policy: Part 1- Personal Injury Protection) I discussed what happens when you cross the Florida state line. If you are in another state and not occupying your automobile, your PIP will not provide coverage for your injuries. A rental car is not considered your automobile.
Uninsured Motorist
Essentially there are no coverage issues with UM coverage. Non-stacked or stacked UM applies in state or out of state and would be afforded while occupying a rental car.
Physical Damage Coverage
The concern most people have when renting a car is if their auto policy will cover the rental car if it becomes damaged. The answer is; it all depends…..
The rental car companies offer a Loss Damage Waiver (LDW), for an additional fee, which transfers the financial risk from you back to them should the vehicle you rented become damaged. You should understand a few things to determine whether or not you should purchase the LDW.
First, there must be collision and other-than collision (comprehensive) coverage on at least one of the covered vehicles on your personal auto policy. The deductible on your policy is the same that will apply to the damages to the rental vehicle.
Second, what type of vehicle are you renting? Physical damage coverage applies for private passenger autos, pickups and vans. “Box trucks” and moving vans are more than likely not covered for physical damage. Some policies govern this based on gross vehicle weight (GVW).
Third, what are the terms and conditions of the rental car company should their vehicle become damaged and will your policy adhere to their demands? Every rental car company and conversely, every auto insurance company may address damages to the rental vehicle differently. And because of this, there is no cut and dry advice that can be given to ensure your personal auto policy will “cover” a claim if a rental vehicle is returned damaged.
When your vehicle is damaged, your auto policy will pay up to the actual cash value of that car. Depending on the rental car company, their contract may hold you responsible for the “full value” of the vehicle as determined by them. The rental car company may also want additional compensation for the “diminished value” of the damaged rental car. Most insurance companies will not pay a diminished value claim. Other fees that may be applied and may not be covered by your auto policy are; loss of use charges for the period of time the rental car is being repaired and towing/storage fees for the damaged auto. Some rental car companies may stipulate in their contract a “demand for immediate payment”. This means you have to pay for the repairs yourself and then submit the claim to your auto insurance company for reimbursement of the portion of the claim they will cover.
What about the credit card coverage? You will have to verify with your credit card company how they will cover the rental car but most credit card companies say their “coverage” is excess to your personal auto policy. Credit card companies usually will not pay for “diminished value” claims, loss of use charges or for certain excluded vehicles. Often times the coverage through the credit card company is void if you have violated the rental car contract. Check the contract for their violations. For example; was there an unlisted driver driving the rental car such as a valet at the hotel or did you fail to lock all doors and windows? If you rely on the “insurance” through the credit card company there is a high likely hood of additional costs which could be passed along to you.
One more thing to consider is; who might be driving the rental car? If you are relying on your personal auto policy to cover you, there may be a problem if a person other than yourself or a covered driver on your policy will be driving. The auto policy covering the rental car may be determined based on whoever is driving at that particular time.
There are too many unknowns to ever conclusively or unequivocally guarantee your personal auto policy will without exception handle a claim in its entirety when you rent a car. Depending on your auto insurance company and/or the rental car company, you may be held responsible for the additional costs not covered in addition to your deductible. The best advice I can give is to purchase the Loss Damage Waiver (LDW). The additional charges for the LDW are well worth avoiding the risk of being subject to potentially thousands of dollars of unforeseen costs.