If you're like most people, when you rent a car your biggest concerns are seating room, luggage space, and a cheap daily rate. You turn down the rental agency's collision damage waiver because a co-worker told you that you're already covered through your personal auto insurance policy. But are you? What kinds of insurance do you have, and what kinds of insurance should you have? These are things you want to know before you're in an auto accident in a rental car.
When you rent a car, your rental agreement is a contract that requires you to return the car in the same condition it was in when you rented it. If the car gets damaged while it's rented to you, the rental agency can look to you to make good on the loss. This is true even if the damage results from someone else's negligence or another cause beyond your control, like an act of vandalism.
The best way to prevent a rental car mishap from turning into a financial disaster is to protect yourself with the right types of insurance coverage. We'll tell you how to protect yourself with the right kinds of insurance coverage.
If you haven't done so recently, you should review your personal auto policy with your insurance agent to find out what insurance you've got, and what your policy limits are. Be sure to ask about protection for temporary or rented vehicles. Your auto policy probably extends some or all of your coverage to a rental car. If your policy doesn't include this coverage, ask your agent about adding it.
When you review your personal auto policy, at a minimum, look for these types of coverage:
This covers bodily injury and property damage suffered by others (but not by you) in an accident when you're at fault. State financial responsibility laws usually require liability coverage so if you have a personal auto policy, you should have this coverage. If another driver is at fault, you (or the car rental agency) will look to that driver's liability insurance to pay for your bodily injury and the rental agency's property damage claims.
Collision coverage will pay the actual cost to repair your car, up to your coverage limit, if it is damaged in an accident. If the car is a total loss, your collision coverage pays the actual cash value of your car, up to your coverage limit. This coverage pays even if you caused the accident. Comprehensive coverage is similar to collision coverage, except that it pays to repair or replace your car if it is damaged or destroyed by something other than an accident, like a fire or vandalism.
MedPay coverage takes care of your medical bills, and those of your passengers, even if you caused the accident. Coverage limits are usually low (in the range of $2,000 to $5,000 per person). MedPay is good to have if, for instance, you don't have a separate health insurance policy. If you do have health insurance, you might want MedPay coverage to take care of your health insurance deductible.
If you live in a "no-fault" state, your state law probably requires you to carry personal injury protection (PIP) coverage. This coverage takes care of certain expenses like medical bills up to your coverage limit, regardless of who was at fault in an accident. PIP coverage is "first-party" insurance, meaning you—the insured policyholder—can bring a claim for PIP benefits for you and your passengers. In some non-no-fault states, PIP coverage is also available. Check with your insurance agent for availability.
This list of insurance coverages isn't exhaustive. There are other kinds you can buy, and you might decide you want them while driving a rental car.
For instance, your personal auto policy might cover you for injuries (or, depending on the state where you live, property damage) caused by an uninsured motorist. A similar coverage called "underinsured motorist" coverage works much the same as uninsured motorist coverage, but it only pays the difference between your losses and the at-fault driver's available liability insurance. In some states, uninsured motorist coverage will also pay if you're hurt by a hit-and-run driver or a so-called "phantom" vehicle (that is, a car that causes an accident without making physical contact with your car and then leaves the scene).
If you have uninsured and underinsured motorist insurance under your personal auto policy, they might protect you when you rent a car. Check with your insurance agent to find out. If you don't have these coverages, or if they don't extend to rental cars, see if the rental agency offers them.
When you meet with your insurance agent, be sure to talk about your coverage limits. Having coverage is only half the battle. You need to make sure you have enough coverage as well. Your agent can suggest increasing your policy limits to suit your individual needs.
If you don't have a personal auto policy, or if you're concerned that you may need more coverage than you currently have, where can you look?
Of course, you can buy more coverage from your auto insurance company. But additional coverage can be expensive, and you'll probably have to pay a deductible and risk higher premiums if you rely on your personal auto insurance after a rental car accident. Whatever the reason, if you need to look elsewhere for insurance, here are the places you should consider:
When you rent a car, the rental agency usually tries to sell you additional insurance. If you don't have a personal auto policy, you'll definitely want to consider this coverage. Even if you do have your own insurance, this coverage can help take care of deductibles or losses that exceed your policy limits.
Here are the four types of coverage most commonly offered:
If you buy a collision damage waiver (CDW), the rental agency will waive replacement or repair costs if your rental car is damaged or destroyed in an accident, even if it's your fault. A CDW might also cover losses by theft or vandalism, but typically won't cover damage resulting from risky behaviors, like reckless or drunk driving.
If you have collision and comprehensive coverages, your personal auto policy probably covers most of what a CDW covers. But a CDW still might be worth the cost. Relying on a CDW instead of your own collision coverage can help you avoid paying a deductible and higher premiums after an accident. If you're not sure, contact your insurance agent.
A CDW can also help cover the cost of certain fees after an accident. For example, most rental contracts allow the rental agency to charge you for the remaining days under your rental contract, for days the rental car is out of service for repairs, and for the loss in value of the car caused by the accident. A CDW will likely cover these fees. Some collision and comprehensive policies cover them too, while others don't. Check your policy before you decline a CDW.
A CDW only covers loss to the rental car itself. You'll want liability coverage to pay for injuries and property damage you cause when you're at fault for an accident. If you have liability insurance, your policy typically provides this coverage when you're driving a rental car. If you don't already have it, you should buy liability coverage from the rental agency or a third-party insurer.
Even if your personal auto policy covers rental car claims, you might want to think about buying supplemental liability coverage from the rental agency. If you only have the minimum liability coverage required by your state, additional insurance protection can cover you for claims in excess of your policy limits. If a liability claim exceeds your policy limits, you are personally on the hook for expenses that aren't covered. You might also prefer to have liability claims covered by the rental agency instead of your personal policy to avoid a premium hike from your insurer.
Personal Accident Insurance (PAI) pays for your medical and ambulance expenses, as well as those of your passengers if you're injured in a rental car accident. Most policies also include limited death benefits. Coverage limits—the maximum amount an insurer will pay for a claim—are usually low.
PAI likely duplicates coverage you already have. For example, if you have MedPay or PIP coverage through your personal auto policy, PAI will overlap with that coverage. Also, if you have separate health and life insurance policies, PAI probably doesn't provide much additional protection. PAI can take care of deductibles you must pay under other insurance policies.
Personal effects coverage (PEC) pays for damaged or stolen personal property that was in the rental car. Sometimes this insurance is "bundled" (sold together with) PAI. If you have a homeowners' or renters' insurance policy, that should cover your personal property. Unless you want to avoid filing a claim or paying your renters' or homeowners' policy deductible, PEC is likely unnecessary.
You probably rented the car using a credit card. If so, your credit card company might provide you with collision coverage (as described above). Check your credit card agreement or call your credit card company to see if you're covered. Note, importantly, that this is only collision coverage. It almost certainly doesn't include any of the other coverages described above, including liability coverage. This protection is good to have, but don't rely on it as your only insurance.
Finally, there are companies that sell rental car insurance. If you buy travel insurance, for example, rental car insurance might be an add-on option to your trip insurance policy. Do some online research to see what's available. You might find coverage that costs less than what the car rental agency charges, or that the rental agency doesn't offer at all. If you need additional insurance protection, this will be time well spent.
Make a list of phone numbers you might need to call, like your insurance company's claims number, the rental agency's claims number, and your credit card company's customer service number. If you have an accident, you won't want to waste time tracking down phone numbers.
Don't stress about spending a few extra dollars for rental car insurance. If the worst happens and you have an accident, you'll be glad you did.
If you need more information about what to do before or after you've been in an accident in a rental car, consult with an experienced car accident attorney.