You'vejust started your vacation. You've arrived at your destination byplane, collected your luggage, and are in the process of renting a car.You've given the person behind the counter your driver's license andcredit card, and now you are being asked if you want to buy "coverage"from the rental car company.
Do you need it?
Probably not, but how can you be sure? The best way is to beprepared and know the answer to this question before you leave on yourvacation.
Why shouldn't you buy insurance from a rental car company? Theperson behind the counter is (usually) not a licensed insuranceprofessional. He or she is not conversant with insurance laws and won'tknow whether or not your personal auto policy covers you when you renta vehicle (in most circumstances, it does).
Some rental car company personnel may say you are required to buythe coverage (not true) or you will be personally liable for any damageto the car while you're renting it (most likely, not true).
This Coverage Is Incredibly Expensive
* Fact. While it's trueyou could be making a costly mistake if you need the rental carcoverage and don't buy it, you're also making a costly mistake if youbuy it when you don't need it.
Rental car insurance is incredibly expensive. On a daily basis,which is how it is sold, the rental car coverage can cost 10 to 20times more than your personal auto policy. If you buy all the coveragesoffered by the rental car companies, you could easily double the dailycost of your rental vehicle.
So who needs to buy the rental car coverage? Well,here's who doesn't. If you have insurance for your own cars, includingcollision and comprehensive coverages, you don't need the rental carinsurance - provided you are not renting the vehicle for businesspurposes.
If you're on vacation, no problem. Just say no. If you're onvacation but planning to do some business, you're probably OK. But youshould talk to your auto insurance agent if you mix business andpleasure on the trips where you plan to rent a car.
* Note. One thing tokeep in mind: Your collision and comprehensive coverages on yourpersonal auto policy have deductibles (the amount you must pay beforethe insurance kicks in). Those deductibles apply to damage to rentalcars as well.
What if You Don't Carry Collision Coverage?
So what happens if you don't carry collision and comprehensivecoverages on your own cars? Many people don't, particularly if theyhave vehicles that are at least 10 years old.
* Note. If you don'thave collision and comprehensive, your personal auto policy won't coverdamages to the rental car if it is in an accident, stolen, vandalized,collides with an animal or burns.
So what should you do?
You can risk it, not buy the rental car company's collision damagewaiver (CDW) or loss damage waiver (LDW), and hope you don't have anaccident or encounter anything that damages the vehicle. You'll savemoney, but it might not do much for your peace of mind, particularly ifyou're driving in a strange city or area.
* Tip. If you're averseto risk, you probably should buy the CDW or LDW. Some rental carcompanies offer some options with their CDWs or LDWs. Some come withdeductibles, like regular collision and comprehensive coverages, whileothers provide first-dollar coverage.
First-dollar coverage comes at a higher price and some options limitthe coverage. In other words, after a certain amount of damage to thevehicle, say $5,000, you would be responsible for paying the remainingdamage costs.
What if You Damage Another Vehicle When You're Renting a Car?
What about damage or injuries you cause to other vehicles and peoplewhile you're driving the rental car? If your personal auto policyincludes liability insurance (most states require some level of suchcoverage), your policy will pay for any damage or injuries you cause toother cars or people - up to the limits of the policy, of course.
* Note. If you arecomfortable with the amount of liability coverage you have for your owncars, you don't need to buy additional liability insurance for vehiclesyou rent.
If you don't have liability coverage - if you don't have a car,you're probably not going to carry auto insurance - you actually maynot need to buy the rental car company's liability policy, either.
Most states require rental car companies to provide some liabilitycoverage to you at no charge. The limit of the free liability coverageis equal to the state's minimum liability limits.
Is this enough? Probably not, and certainly not if you cause a serious accident.
The minimum liability limit requirements are something like no morethan $15,000 for injuries to any one person, no more than $30,000 forinjuries to all persons, and no more than $5,000 for damage to thevehicle(s) you hit. That's not much at all.
* Tip. If you have anyassets to protect, you should strongly consider purchasing the rentalcar company's liability coverage, which costs $7 to $15 a day dependingon the state and level of coverage you choose. Higher liability limitsmean higher daily costs.
If you have any concerns about whether you need to buy the coverages offered by rental car companies, you should talk to your auto insurance agent. Rental car insurance can double your daily rate. That's a lot to pay for something you don't need.