3 insurance options for rental cars

Chris Kissell

When you crash your car, auto insurance is there to pick up the pieces and help you repair any damages. But how do you protect a rental car?

Here are three options for covering rented wheels.

1. Personal auto insurance coverage

Your personal car insurance policy usually covers damages to any vehicle you rent, but check with your insurance agent or company to be sure.

Coverage plans for your vehicle should completely transfer to any rental car. This means that your liability coverage – which pays for damages you cause to another vehicle or person – should apply in any identical situation that occurs with a rental car.

However, beware if you’ve decided not to carry optional collision and comprehensive insurance on your own personal auto policy. These types of coverage protect damage you cause to your own car, as opposed to someone else's car.

 “If you dropped either comprehensive or collision coverage on your own car to save money, you will not be covered if your rental car is stolen or damaged,” Lynne McChristian, Florida representative for the nonprofit Insurance Information Institute.

Also, remember that if you make a claim on a rental, you’re on the hook for the same costs you’d pay when making a claim on your own car, says Pete Moraga, a spokesman for the Insurance Information Network of California.

“If you use your own insurance to cover a rental car, your deductible will also kick in,” he says.

While your personal policy should cover damages, some rental car costs may not be covered following an accident.

For example, if the damaged car can’t be rented for a certain period, you may be charged a “loss of use” fee. This penalty – which can be as much as the daily rental rate, plus other fees – compensates the rental company for the income it loses while the car is being repaired.

Other fees you may be forced to pay include:

  • Towing.
  • Storage.
  • Impound costs.
  • Administrative charges.

“Rental car companies will charge this cost to the driver, and if their insurance doesn’t cover it, they will have to pay for it out of pocket,” Moraga says.

2. Credit card company coverage

Many credit card companies offer free rental car insurance coverage if you pay for the rental using your card. However, this type of coverage typically is limited to the damages that occur to the rental vehicle itself.

“Credit cards usually cover only damage to or loss of the rented vehicle, not for other cars, personal belongings or the property of others,” McChristian says.

Typically, she says, there’s no liability coverage for bodily injury or death claims. Plus, some credit card issuers recently have changed their rules, McChristian says, “so you may not have as much coverage as you thought.”

It’s important to understand the details of your credit card company’s insurance by reading the card issuer’s rental car insurance agreement. The extent of coverage varies widely from company to company. Furthermore, McChristian says, an issuer’s platinum card may offer more coverage than the same issuer’s gold card.

Sarah Ely, a spokeswoman for MasterCard, says cardholders using rental car insurance should call the toll-free number on the credit card to file a claim. Once the cardholder’s insurance is confirmed, he or she is transferred to a claims agent, and a case number is created.

MasterCard investigates the claim, and then makes a decision. The cardholder is notified in writing of the case outcome, and any payment is issued soon afterward, Ely says.

At Visa, all accountholders who rent a car with a U.S.-issued Visa credit card get coverage known as a collision damage waiver, according to spokeswoman Sarah Pew. This covers damage caused by collision or theft if the cardholder is the primary renter of the car. Loss-of-use fees and some towing charges also are covered.

As with MasterCard, cardholders filing a claim should call the toll-free number on their card. The cardholder must provide various documents – including copies of the car rental agreement, the declarations page from the cardholder’s own car insurance policy and the accident report – before the claim is accepted and a decision is made.

3. Loss damage waiver

Car rental companies also offer accident protection of their own. This comes in the form of a loss damage waiver, or LDW.

LDW is not insurance, but it does protect you if your rental car is damaged or stolen. This optional coverage keeps you from having to pay repair costs and other fees, such as loss of use, says Paula Rivera, a spokeswoman for rental car company Hertz. However, LDW is voided if the damage occurs as a result of recklessness, such as driving drunk.

If you are in an accident, make sure you follow the rental car company’s rules closely. For example, drivers who rent from Hertz and buy LDW coverage must report the accident immediately to Hertz and local police, Rivera says. Customers in a situation like this should jot down details about any witnesses as well as the other vehicles and drivers.

Rivera says customers who refuse the loss damage waiver are responsible for as much as the full value of the car if an accident occurs, minus the car’s salvage value. Other fees – such as towing and loss-of-use fees – also may apply if you don’t buy a waiver.

One advantage of a waiver is that – unlike a standard car insurance policy – there’s no deductible.

LDW coverage generally costs $9 to $19 a day, according to the Insurance Information Institute. While it covers the cost of repairing the car, it won’t protect you from damage you cause to other cars or people.

If you have a personal auto insurance policy, such damage should be covered under the liability portion of your policy. If you don’t have this coverage, it’s wise to buy supplemental liability coverage from the rental car company. This typically costs $7 to $14 a day, according to the Insurance Information Institute.

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