If you need a rental car, you’re probably on a vacation or business trip. In any case, the last thing you need to worry about is getting into a car accident, and being held responsible for damage to the rental vehicle. There are steps you can take to protect yourself from unexpected liability. It usually comes down to whether you have the right insurance coverage in place at the time of the accident. Read on to learn more.
After a car accident involving a rental car, one of the first things to keep in mind is that, as the renter, you are responsible for any damage or loss to the rental vehicle. More specifically, when you rent a vehicle you are contractually obligated to return the vehicle in the same condition it was in when you first rented it, even if the damage is the result of someone else’s negligence.
If you get into an accident, or otherwise damage the vehicle at any point during the rental period, the three primary sources of potential insurance coverage are the rental car company, your personal car insurance, and the credit card you used to pay for the rental.
When renting a vehicle, the rental car company’s representative will almost always offer you additional insurance coverage. Let's look at the four most commonly offered supplemental coverage options offered by car rental companies.
Collision Damage Waiver. Also known as a damage waiver or loss damage waiver, with a collision damage waiver, the rental car company will waive any vehicle replacement or repair costs if the vehicle suffers damage, or if there is a theft of the vehicle during the course of the rental. Exceptions usually include damage that is the result of reckless driving, and damage incurred while the vehicle is being operated by an unauthorized driver.
The collision damage waiver is not technically insurance, and it is always optional (at an extra cost, of course). If your personal car insurance policy has comprehensive and collision coverage, your car insurance policy will probably pay for any damage or loss to the rental vehicle. However, you’ll need to contact your insurance company to confirm this. Even if you do have coverage, you’ll probably have to pay a deductible and risk increasing your personal car insurance premiums when you file a claim.
Liability Coverage. Liability coverage pays for property damage and medical expenses incurred by other individuals in a car accident you cause while driving the rental vehicle.
This liability coverage offered by the car rental company will usually overlap with your personal car insurance coverage (assuming you own or drive a vehicle). But keep in mind that if you have only state minimum liability insurance coverage, it may not be enough to fully protect you if you’re involved in a car accident. Additionally, in certain situations, such as an extended rental period, your own car insurance policy may not provide the necessary coverage.
Personal Accident Insurance. This insurance will pay for any injuries to the rental car driver, or any of the driver’s passengers, in an accident involving the rental vehicle. It may also pay for ambulance expenses, and even death benefits.
If you have medical insurance or "personal injury protection" coverage with your personal car insurance policy, personal accident insurance will probably provide overlapping coverage. But again, you’ll need to confirm this with your own insurance company and be aware of any additional costs or expenses, such as co-pays and deductibles.
Personal Effects Coverage. This coverage will pay for lost or damaged personal property that was kept in the rental vehicle. Most homeowner’s and renter’s insurance policies will provide similar coverage. Unless you want to avoid filing a claim or paying your renter’s or homeowner’s insurance policy’s deductible, this coverage is usually unnecessary.
If you own or regularly operate a vehicle, you probably have personal car insurance. As discussed above, most personal car insurance policies will provide coverage that parallels what the rental car company’s liability coverage offers, and many will provide similar protection, such as comprehensive and collision coverage.
Should you choose to pass on liability coverage or the collision damage waiver, some rental car companies may require you to provide proof of insurance coverage from your personal car insurance policy (name of insurer and policy number, for example).
By renting a vehicle using a major credit card, you may automatically have car rental insurance. Depending on the terms of your credit card agreement, your credit card company may pay for any damage that occurs to your rental vehicle during the course of the rental. However, your credit card almost never provides liability coverage, which is arguably the most important kind of coverage. Learn more about different types of car insurance coverage.