Should You Buy Extra Rental Car Insurance At The Counter?*
Let’s start with the short answer…yes…maybe…maybe not…dang it!
Not all Insurance policies are created equal, so you really do need to check with your insurance agent before making your decision. That is why we cannot give you a specific answer, but we can try to explain what it all means.
The interesting thing about this topic is that we get asked this question a lot, and we have learned a lot over the years as a result.
For the most part your liability “should” extend to a car you rent, or borrow, as long as it is for personal use. However, I don’t know about you, but I don’t like to “should in my pants.” Seriously though – talk to your agent. Some of these Insurance Carriers do not write their policies on ISO forms, so you really have no idea what they are covering without digging into them. We can, however, for purely academic purposes tell you what we tell our customers.
Rental Car coverage typically breaks down into two categories: Liability & Physical Damage coverage.
- Liability coverage helps pay for bodily injuries and/or property damage of another party aka you hit someone else.
- Physical Damage coverage typically referred to as Comprehensive & Collision coverage this helps pay to repair the damages to your vehicle (or your rental car) if it’s damaged by a covered peril.
Assuming your policy has the above coverages you might also assume they extend to a rental car. Know what happens when you assume?
A vast majority of the time your Liability Coverage will extend, unless your policy was sold to you by a person in a red polo and khakis, so you would not need to take the Rental Car company’s Liability coverage. When it comes to the Physical Damage coverage there is a lot of gray area.
Yes, there is potential for your coverages to extend. However, there are gaps. The scenarios we have seen play out – very nasty scenarios – involve these gaps. Your Auto policy is based on Actual Cash Value a vast majority of the time (yes, there is Agreed Value, New Car Replacement, etc. but let’s assume you fall into the other 90% of the time bucket). When you rent a car, and you total said car in an accident they are going to want two things from you: a brand new car (doesn’t matter that the one you were driving was 3 years old with 100k miles on it) AND loss of rental income. Let’s breakdown these issues:
- New Car for an old car. Your insurance is NOT going to like that. They will take a look at the age of the vehicle, miles driven, and the local market to come up with a value. This can vary greatly from the Brand New off the dealer lot price!
- Loss of Rental Income – this one is a doozy. While the car is in the shop being fixed – even for a minor accident – they will try to charge you for Loss of Rental Income because that car could be generating rental income if it were not for you. Remember that $35 / day Hotwire rate you paid to rent it? Well, that is NOT the rate they will use. They will use the highest rate they have published with the State. $300, $500, etc. per day. Yup. Gotcha.
The only way to fill in the Gaps above is to take the Physical Damage coverage from the Rental Car company. Some credit cards cover all of this with a $0 deductible if you rent the car on their card. That is probably the best option. You will have to investigate this , but they do exist.
What is our advice then? Take the Rental Car Company’s physical damage coverage. If you are one of our insureds we can look at your Liability and advise you of what to do there, but from experience 99% of the time the Liability extends. Yeah, it sucks…I know. However, do you want to be left holding the bag on a brand new car and thousands of dollars in loss of rental income? All to save $XX per day on your rental car? I wouldn’t.
The silver lining in all of this though – if you take the Rental Car physical damage coverage your check-in and check-out process is much quicker! Remember the Seinfeld episode? “Yeah, you better give me the insurance because I’m gonna beat the hell out of this thing!”
Skimping on insurance is never advised. If you have questions just let us know. We can walk through this in much more detail if you need us to.
*It should be noted all of these stories are purely anecdotal and for educational purposes. You need to look at the exact verbiage of your policy as these posts are simply blog posts on the internet.