By far the number one question I have answer about Insurance coverage is "do I need to buy coverage on the rental vehicle"? Everyone likes to waive this expense since it can be more costly than the advertised cost of the rental of the temporary car or truck. That's right.. you can see a great rate of $24.99 a day for an economy car or U-Haul truck and the insurance rate and taxes can increase it to over $50.
So here's the scoop... Usually, the first thing you would do is to call and ask your insurance if you need this. Your insurance agent has probably told you that if you have physical damage coverage called comprehensive and collision (comp and collision for short) on your personal vehicle it will extend to substitute vehicles (such as a rental car). This is true to an extent, but it's not the whole truth. Once your insurance agent verifies that at least one car on your policy has comp and collision they usually tell you to waive the rental car insurance. A better insurance agent tells you that often the credit cards companies will include loss of use coverage as a benefit, (for renting a car with their card).
Several major credit card providers offer rental auto insurance to cardholders, such as Visa and American Express, but certain cards only offer it to elite members, so check with your credit card company first. For example, Visa's auto rental collision-damage waiver (given to Visa credit card holders) provides reimbursement for damage due to collision or theft up to the actual cash value of most rental vehicles. However, Visa's coverage kicks in only on theft or damage expenses that are not covered by other insurance or reimbursement. In essence, the credit card acts as a secondary insurer, and it would still be wise to have your own personal auto insurance and you will be responsible for your deductible While this is some additional coverage to you there can still be a gap in coverage that you assume with the rental.
That gap is called “Loss of Use”. Loss of Use is the cost that the rental company will absorb if there is an incident where the vehicle was not available to rent to the next customer. Examples of Loss of Use would include loss of rental income, towing expenses, deductibles that the insurance or credit card claim would not pay. You would be surprised how this all tends to work against you. Again, either the car insurance provider or the credit card provider may have exclusions regarding this coverage. There have been examples of parking lot damage or hit and run while not on a public highway that have been excluded from the payment of the claim. Rather than the frustration of working between both companies to get the claim paid, it would be better to transfer all of the potential exposure back to the rental car company.
The benefits of buying insurance from the rental company is that the coverage transfers liability from you and your primary insurance policy directly to the rental car insurance policy. It protects you from any out-of-pocket expenses such as the deductible on your auto policy along with the possible loss of discounts for having the claim or surcharges assessed by the auto company (depending on the carrier).
Rental car insurance can cost roughly $20 to $40, depending on what plan you select. The collision damage waiver, also known as optional vehicle protection or loss damage waiver, can cost as much as $19 per day and shifts liability for collision damage from the person renting the car to the car rental company. Liability insurance, which provides protection for up to $1 million, costs between $7 and $14 a day. However, your personal auto insurance should already include liability insurance. For an additional $1 to $5 a day, personal accident insurance covers medical and ambulance bills for the driver and passengers in the event of an accident.
Know that there are two major issues when renting a vehicle:
First, read, understand, and comply with the rental agreement.
Second, the best choice at the rental car counter is to spend about $25 a day and accept the Loss Damage Waiver, Liability and Personal Accident Coverage.
I recommend that you buy this coverage, enjoy your vacation or trip, and feel at ease knowing that a damaged car is the problem of the rental car company and not yours.
If you have any questions, please give me a call at Homestead Insurance (352) 505-6565
Short Answer: Yes.
Question: Do I need to buy the additional insurance when renting a car?
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The long answer: Full explanation is discussed in detail below.