Do I need extra insurance when I rent a car?

Question: I’m renting a car, and they are trying to get me to purchase collision coverage.

Does my personal auto policy already cover this? Do I need to purchase it from the rental car company? It can get expensive!

By Erik Cronk, Agency Owner

The answer can be yes or no.

Does your collision coverage from your personal auto policy transfer over to a rental car? If your policy has collision coverage on one of the vehicles on your policy, then the answer is yes. If you have liability only coverage (no collision) on all the vehicles on your policy then the answer is no. This is the easy part.

Where it gets confusing is that rental car companies can also charge you for two items that your personal auto policy does not cover: 1) Diminution of Value and 2) Loss of Use. If you purchase the rental car company’s collision coverage (or sometimes called the Collision Damage Waiver (CWD) or Loss Damage Waiver (LDW) then usually these two items are covered along with the damage to the vehicle. But read the fine print or ask them to clarify that they are and never assume.

Diminution of Value usually rears its head “after the fact”. Yes, your collision coverage from your own personal auto policy will pay for the damage to the rental car. But what happens when the rental company goes to sell the vehicle, and they cannot get “full market value” for the vehicle because it was involved in a prior accident. The difference between that full market value and what they are now able to sell it for is diminution of value, and that amount is something rental car companies will try to recoup from you. It is not covered by your personal auto policy.

Also, what if that rental car is now out of service for one, two, three weeks? The rental company has now lost the ability to earn income from the vehicle while it is being repaired. This is called Loss of Use. They can also come back and collect this amount from you. This is also not covered by your personal auto policy.

So what do you do? Here’s a small checklist for anytime you plan on renting a car:

  1. Check with who you have your credit card(s) with and see if they provide diminution of coverage and/or loss of use, along with CWD or LDW coverage. Some do, some don’t. If they do, then your collision coverage from your personal auto policy in combination with using that credit card is usually enough. You may have to waive the rental car company’s coverage to invoke coverage under your credit card. Again, read the fine print.
  2. Read the fine print (notice the theme here?) or better yet ask the person at the counter to show you that part of the contract. I’ve rented from some companies that do not have the diminution of value or loss of rental coverage clauses in their contracts, taking that part right out of the equation and making your decision easier.
  3. Before you leave the rental company’s lot, use your smartphone to take pictures or video of the vehicle from all sides and don’t forget the top too! Get photos from an angle where you can see any dent in the vehicle. Try and get at least one “locating” picture that shows the sign for the rental car lot as well as your car, demonstrating that you took the photos in the lot. You can never have enough photos! This way if you go to turn in the vehicle and they say you damaged it, but you have the pictures to prove you didn’t, it can save you a whole lot of hassle not to mention money out of your pocket. If your vehicle has any damage to it when you take possession, immediately document it with photos and have a rental sales associate do the same on your paperwork, with BOTH of you initializing it. Never just allow a sales associate to tell you “no big deal” and drive off without documenting!
  4. If your rental car experiences some type of breakdown, if possible take pictures of the engine part giving you the problem. I once had a hose clamp start leaking where it left the radiator. When the rental company called back a week later after I was home, trying to charge me for thousands of dollars in repairs all it took was an email and a few pictures and they changed their tune in a matter of seconds.
  5. Make a copy of your insurance ID card and keep with your other important documents as you travel.
  6. One additional thing to consider: When you’re on vacation or away from home, what if you use the same credit card for meals, lodging and other purchases that you used to rent the car? What happens if you’re in an accident, and the rental car company invokes the “small print” and charges your credit card with the damage amount………leaving you with little to no credit limit left, when you still have lots of vacation or work travel ahead of you? If you have multiple cards that’s one way around it, but it’s still something to think about.

Purchasing the rental car company’s damage waiver is the one way you can ensure the least amount of hassles if you were to have an accident with the rental vehicle. It’s the only way our agency can guarantee you the least amount of problems or out of pocket costs if an accident were to occur. Everyone’s tolerance for risk is different, so in the end it turns into a judgment call. But being properly informed in advance means you can make the best decision for your particular situation.