What's in a name? Rental car insurance by any name will cover you just the same. Whether you buy it from the rental car agency or use your own insurance, you'll be protected from having to pay costly repair bills if you damage the rental company's property. However, there are some intricacies of rental car insurance of which you should be aware in order to make an informed purchasing decision.
Your auto insurance
Your own collision coverage is "excess" to any other coverage
Your collision insurance coverage in your personal auto insurance policy will likely cover damage you cause to any car that you're driving - including a rental car. However, many auto insurance policies say that your own collision insurance is "excess" to any other coverage, meaning that any coverage you buy from the rental car company kicks in first. In addition, your own collision insurance requires you to pay a deductible before the insurance company picks up the tab.
Your comprehensive coverage will likely apply to any rental car you drive and cover fire, theft, vandalism, or animal collisions. Again, your personal comprehensive coverage is excess coverage and is subject to your deductible.
If you cause an accident, your liability insurance will pay for the damages you cause to someone else, plus any medical expenses that arise from your negligence. Your liability insurance will cover you up to the limits of your policy, and if you were driving a rental at the time of the accident, your personal auto liability insurance, like your comprehensive and collision, will likely be excess coverage.
Rental car company's insurance
Rental car companies such as Alamo, Avis, Enterprise, and Hertz offer various types of insurance and waivers that broaden your liability protection and that can relieve you of the responsibility of paying for a wrecked rental.
Loss damage waivers (LDW) and collision damage waivers (CDW) from the rental company essentially take the place of your own collision and comprehensive insurance, letting you off the hook if the rental is stolen or vandalized, or if you crash the rental car company's vehicle. Some LDWs include the CDW, and some waivers require you to pay a deductible, just like your comprehensive and collision insurance.
Alamo, Avis, Enterprise, and Hertz insist that the waivers are not insurance. (In order for these to be true insurance, you have to purchase them through an insurance company. This option is not underwritten or sold by an insurance company, but it's the rental car company's version of comprehensive and collision insurance.) Cost: between $7 and $25 per day, depending on the rental car company and what kind of car you rent.
Alamo, Enterprise, and Hertz offer liability insurance supplements that will cover you for up to $1 million if you cause an accident, damage property, or injure others. This coverage has a "combined single limit," meaning the insurer will pay no more than $1 million for bodily injury and property damages. If you purchase this insurance from the rental car company, it becomes your primary liability insurance. Your own personal auto liability insurance is, again, relegated to excess-coverage status. Cost: between $7 and $15 per day, depending on where you rent.
You can also purchase accidental death and personal property insurance from your rental car company. Enterprise, for example, provides Personal Accident Insurance (PAI), which pays out a death benefit of $100,000 for the driver of the rental vehicle, whether you're in or out of the car. For example, if you slip in the bathtub and die during the time you're renting the car, the accidental death benefit pays out. It also provides a $10,000 death benefit for passengers who are killed while in the rental. Further, the PAI will pay for up to $3,500 in medical expenses for both you and your passengers. Cost: between $1 and $5 per day, depending on the rental car company.
Alamo, Enterprise, and Hertz also offer "limited" coverage for your personal property that might get stolen out of the rental vehicle.
Making sense (and cents) out of all the coverages you already have on your auto insurance and the ones that are offered by the rental companies is not easy. Buying all of the insurance offered from a rental car company can double your rental costs. Buying none of it might put you in a bad financial spot if you have an accident. Here are some factors to keep in mind.
If you don't have your own collision coverage, buying the LDW is a good idea.
If you don't have collision and comprehensive insurance and you're renting a car, it's a good idea to purchase the LDW or CDW, whichever your rental company offers. You might want to buy the waiver that offers you the broadest protection in this situation. Rental companies have several levels of damage waivers. For example, Alamo provides three levels of coverage: you're not responsible for any damage; you're responsible for damage that exceeds $500; you're responsible for damage that exceeds $3,000.
Of course, the broader the coverage, the more you're going to pay. Enterprise's partial CDW, for example, requires you to pay a deductible (which varies by state). That costs $6.99 per day. Enterprise's full CDW costs $16.99 per day, but you aren't responsible for paying a deductible. All of Hertz's LDWs are deductible-free.
You might eschew the LDW altogether if you have collision and comprehensive coverage because you'd be paying for "double coverage." Just remember that you have to cough up your deductible if the car is stolen or vandalized, or if you crash it.
You who don't own cars will likely find the supplemental liability insurance offered by the rental companies valuable if you don't already have a nonowners auto insurance policy (For more, see No car, no problem.) The cost compared to the coverage is pretty good, but keep this in mind: Most states require the rental companies to automatically provide at least the minimum required liability coverage at no charge to you.
In this situation, you won't have to purchase any insurance from the rental company to get some liability coverage. If you feel that you can get by with just the bare-bones policy, you won't spend a dime on liability insurance. (For more, click to your state's minimum auto liability requirements.)
Got your own liability insurance? In this scenario, it will generally kick in first if you cause an accident. And remember, there's no deductible for liability insurance.
Rental car company offerings of accidental death and personal property insurance give you needless "double coverage" if you already have health, homeowners or renters, and life insurance. Typically, your health insurance (or auto insurance if you have MedPay) will kick in for your medical costs, regardless of what car you're driving. Your homeowners or renters policy normally covers personal property if it's stolen or damaged while in your car. And your life insurance will pay out, regardless of how you meet your end.
Before you rent a vehicle, check your auto and homeowners or renters policies to get an idea of what coverage you have while in the rented vehicle. And while at the rental car company, take some time to find out exactly what they offer. Compare those coverages to the ones you already have. That way, you can avoid buying coverage you don't need.
Source: Insurance Information Institute Reprinted with permission of Insure.com, the copyright holder. http://www.insure.com
