Friday, July 11, 2008

The fundamentals of rental car insurance

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 insurance vs. the rental car company's insurance

Your auto insurance
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 all 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.
These 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.
There are also Additional Liability Insurance supplements that will often 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. Avis, for example, offers Personal Accident Insurance (PAI) that provides accidental death benefits and medical expense benefits to the driver and all passengers. Avis' PAI provides $175,000 in accidental death coverage, $2,500 in medical coverage for injuries due to an accident and $250 for ambulance expenses. (Limits in New York are different.)
Most rental car companies also offer "personal effects" coverage for your personal property that might get stolen out of the rental vehicle.