Whether you are taking a road trip or looking for temporary transportation while your car is in the shop, renting a car has its risks. When you drive a car off the lot, you assume responsibility for anything that happens to it; that is, unless you purchase the rental car insurance offered by the rental company.
Also known as a collision damage waiver, rental car insurance shields you from financial liability to the rental company if you damage the car. Though the coverage is beneficial, it can also be expensive.
Before you pay for rental car insurance, ask yourself the following five questions to find out if rental coverage is the right choice for you.
Does my personal auto insurance cover my rental car?
If you own a vehicle, you should already have car insurance. If you have liability only, then your rental car will not be covered for damages. If you have collision and comprehensive, however, the coverage will probably extend to a vehicle you rent. If you choose to file against your personal insurance, keep in mind that you will probably be responsible for paying the deductible, and you may face rate increases due to the claim.
Does my credit card offer rental car damage benefits?
According to Kiplinger, many credit card companies offer their members rental car damage protection at no added cost. You will likely need to pay for your rental car with the credit card and perhaps decline the collision damage waiver to be eligible for this benefit. However, this coverage is usually designed to fill in any gaps left behind by your personal line of insurance, such as your deductible and any miscellaneous fees, such as loss of use. Contact your credit card company to find out more about this coverage and the conditions you must meet to qualify for it.
Should I be concerned about loss valuation?
Your rental agreement will probably state that you are responsible for reimbursing the rental company for the full value of the vehicle if it is destroyed in an accident or stolen. If you decline the collision damage waiver and choose to rely on your personal insurance, you should know that your insurer may only cover the actual cash value of the vehicle. If the rental company holds you accountable for the replacement value, however, you might get stuck paying the difference. A collision damage waiver relieves you of all responsibility for loss under covered conditions.
Do I have room on my credit card to pay for damages?
If you decline the collision damage waiver, the rental company may charge the credit card it has on file for its losses before your insurer settles the claim. You could end up with a maxed out credit card, expensive interest charges, and a damaged credit score until the balance is reimbursed.
Who will drive the rental car?
Under a collision damage waiver, your vehicle should be protected so long as it is only driven by an authorized driver. If you decline the damage waiver, however, things might become more complicated. If, for example, you rent a car in your name and take turns driving with a friend on a road trip, who’s insurance will pay for damages if she crashes the vehicle? You are the one with liability to the rental company, but your friend was the one driving at the time of the collision. Talk with your independent agent if you have questions about your personal insurance and to find out if you might be vulnerable to coverage gaps when you rent a car.
