Insurance is coverage you purchase to protect yourself from something you hope will never happen. Rental car insurance – though not technically “insurance” – does just that: It shields you from financial hardship if the vehicle you rent becomes damaged or destroyed while in your care. When rental car companies offer to sell you a collision damage waiver, they are stating that they would not pursue you for financial losses stemming from damages to your rental vehicle. As advantageous as that may seem, it does not necessarily mean this coverage is right for you. Continue reading to learn some of the benefits and drawbacks of rental car insurance.
Benefits of Rental Car Insurance
The collision damage waiver can give you the instant assurance that you will not be billed for the damages to your rental car if something happens to it while it is in your care. Waivers typically cover the total loss – not just the damages. That means that the loss of use, repair expenses, and administrative costs are all transferred back to the rental company, absolving you of the financial responsibility. There is typically no deductible to pay, nor is there the same lengthy claims process you might experience with alternative forms of coverage. In addition, you are never out-of-pocket for any damages like you might be if the rental company advances a damage claim onto your credit card while it waits for your insurer to provide reimbursement.
Drawbacks of Rental Car Insurance
On the flipside, there are some possible drawbacks that should be weighed against the benefits of rental car insurance. The first is exclusions, which are almost always included in loss damage waivers. Generally, the waivers may state that you can still be held responsible for damages to a vehicle if:
- The vehicle is damaged while being operated by an unauthorized driver
- The vehicle is damaged while being used for commercial purposes
- The vehicle is damaged while being used to carry out a crime
- The vehicle is damaged while being used outside the U.S.
- The vehicle is damaged while you are speeding, racing, or being reckless
- You rent or used the vehicle under fraudulent terms
- You drive the vehicle under the influence of drugs or alcohol
Another drawback of rental car insurance is the cost. Although every rental company charges different prices for coverage, it is not unusual for a collision damage waiver to cost as much as $15 per day. This can raise the price of a rental by 50 percent or more, which is a big price to pay to minimize your risks. If that were translated to a yearly annual premium, it would total more than $5,000 for collision and comprehensive protection alone – hardly a good deal.
Alternatives to Rental Car Insurance
If rental car insurance just isn’t right for you, don’t worry; you have options. First and foremost, your personal collision and comprehensive insurance will probably transfer to your rental vehicle, though you may have to pay a deductible.
Fortunately, many credit card companies offer rental car coverage at no charge, and it just may cover the cost of your deductible. In some cases, an umbrella insurance policy might also pay benefits toward a damaged rental car, although you may be subject to a self-insured retention (which works similarly to a deductible).
We recommend contacting your credit card company and your independent agent to find out what types of rental car coverage are available to you and whether paying for the collision damage waiver could be the right choice for you.
Considering all of the above, we believe that opting for the Collision Damage Waiver is a good idea. If you have questions about rental car coverage or any other type of insurance, be sure to give us a call.