Rental Car Insurance: To Buy Or Not To Buy

-- Our Consumer Credit Counseling Services (CCCS) warns what to watch out for

Credit counselors at our Consumer Credit Counseling Services (CCCS) agency meet clients everyday who suffer the consequences of bad luck and poor financial decisions. And, although a death in the family, layoff or divorce may be largely unavoidable, personal finance education will enable consumers to make better choices to prevent financial breakdowns.

Renting a car, without being fully covered for damage and theft, is risking your financial future. If you are too distracted by a phone conversation and hit a street light and crunch the front end of your rental car, you are responsible for towing, the full cost of the auto body and/or mechanic’s repair, loss-of-use charges (the $35-$50 a day rental fees that it loses while the car is at the shop), and other “administrative fees” imposed by the rental car company. This expense could easily reach into thousands of dollars.

How auto rental collision damage waivers work
To avoid assuming a huge liability when renting a car, you must be covered by your own auto insurance, your credit card or by an “auto rental collision damage waiver” from the rent-a-car agency.

—Auto insurance

Ask your insurance agent what coverage you already have when renting cars. Many providers do insure rentals, but require a high level of auto insurance to qualify for these benefits. See if your policy covers loss-of-use charges and associated fees from the rental car company. Determine if a claim could show on your driving record and ultimately affect your insurance rates. Or, if an accident was paid for by insurance you buy from the rental car company, would it show up on your record there too? Are you covered for both business and leisure travel? What about personal liability?

—Credit card companies

Most credit card companies give rental collision damage to their card holders as an added-value benefit. The only way to know is to visit your credit card company’s corporate Website or as a customer service representative for a description of the benefit in writing. VISA, for example, reimburses for costs not covered by your personal auto insurance, including towing, your deductible and loss-of-use and fees from the rental car company.

But every card differs. Watch for loopholes. VISA won’t cover personal liability or renters in certain countries, for instance. The company also won’t pay more than a car is worth, or for problems incurred when the rental period exceeds 15 days, or for select vehicles such as vans, trucks and RVs.

—Rental car companies

Purchasing damage waivers from rental car agencies is easy—just sign their rental form and the fee (which, per day, is nearly as much as to the price to rent the car) is charged to your credit card. If you have an accident, you won’t need to pay for damages or loss-of-use fees. You would also have minimal paperwork and not be out any cash while the case is being settled.

So why would anyone forgo this great-sounding insurance? Basically, because it’s expensive - very expensive. If you pay $1,000 a year for your own auto insurance, that averages to $2.75 a day compared to full rental car insurance for $25 and up. For those already covered through their own policies and credit cards, paying for the rental car waiver causes them to pay twice for the same benefit.

The rental car agency will also offer you supplemental liability insurance for another fee per day. With full insurance from the rental car company, you’ll easily pay nearly as much daily for the insurance as the rental fee!

Keep in mind that if you cause an accident, the police file a report, and the incident ends up on your driving record, the cost of your auto insurance will go up, regardless of which type of insurance you’ve relied upon.

So, will you be buying the supplemental insurance the next time you rent a car? Armed with the knowledge of how to ensure you have proper rental car coverage, you’ll make a more informed which will help protect your financial future.

Should you experience an auto, health or home crisis not covered by insurance and find yourself in debt as a result, an experienced, NFCC-certified credit counselor from our Consumer Credit Counseling Services (CCCS) agency can work with you to devise a realistic household budget and plan to pay down your debt.

Call 888.656.CCCS or visit our Consumer Credit Counseling Services (CCCS) agency online to make an appointment for a no-cost credit counseling session.