What the heck? My rental’s not covered?

How often have you rented a vehicle and decided not to purchase the Collision or Loss Damage Waiver? For years, it has been suggested that buying insurance at the rental agency is a waste of our money because we’re covered by our personal auto policy. However, the Independent Insurance Agents & Brokers of America (IIABA) recommends getting the coverage, at least for short-term rentals. Here’s why.

There are lots of provisions in that car rental contract that can get ugly in the event of an accident, damage or theft.

A rental company needs to keep its fleet ready-to-rent. Any time a car is disabled it means a loss of value and revenue. Yes, your personal auto policy may offer coverage for rental vehicles but it may not be consistent with the rental agreement that we all sign but seldom read.

And what about that credit card coverage? Many credit cards offer some insurance coverage but only if you use that specific card to pay for the rental. Most cards, according to Hertz, “only reimburse you for your deductible after your own insurance pays.” They also may not cover certain rental vehicles such as large SUVs or luxury vehicles.

Perhaps the greatest limitation of coverage offered by your credit card company is that it only covers physical damage. There generally is no coverage for liability claims against you by people injured in an accident.

How would your personal policy and the rental contract differ? Your personal policy may cover the amount necessary to get your rental back on the road based on the actual cash value of the vehicle. However, the rental agreement may stipulate that you are obligated to restore the vehicle to its full replacement value. That could leave you paying the difference.

Another risk of not taking the insurance offered by the rental company is having the damaged car repaired before your own insurance company can inspect and value the damage. The rental agency has no obligation to delay repairs. Remember, their motivation is to get their damaged cars back in service as quickly as possible. If your insurance company can’t assess the damage, then they may not cover your costs.

In addition, the rental company may charge for loss of use – the income they could have earned had the vehicle been ready-to-rent.

There also may be a limit on the rental insurance coverage. Alamo Rent-A-Car stipulates that their Waiver Saver 3000 policy will pay only up to $3,000 of loss or damage. Their contract suggests that you check with your personal insurance or credit card company regarding additional coverage.

The Alamo waiver also displays in capital letters the situations that invalidate their coverage, reminders of the terms and conditions to which you need to adhere:

• Only named drivers are covered and must be licensed
• Alcohol or drug impairment in an accident invalidates coverage
• Towing or pushing anything is prohibited
• You cannot drive persons or property for which you are paid
• No explosives (e.g. fireworks), corrosives, chemicals or pollutants in the vehicle
• Unlocked vehicles resulting in theft of the vehicle or components voids coverage

The IAABA also notes that damages can be charged directly to the credit card you gave them when renting the vehicle. Those charges could “max” your credit card and put a serious crimp in your travel or vacation plans. They also may have provisions to capture other costs such as appraisals, towing charges and storage that quickly can add up. Further complicating a claim are provisions that may vary from state to state.

Keep in mind, as well, that personal auto coverage does not usually cover physical damage to rented motor homes, motorcycles, mopeds or other vehicles that are not considered private passenger vehicles. Also, trailers have limited coverage on your policy. Again, these are good reasons to buy the rental insurance.

Finally, most personal auto policies offer coverage only in the United States, its territories and possessions, Puerto Rico and Canada. If you travel outside the country, including Mexico, you need to check your coverage and read their rental coverage before buying it. The IAABA suggests visiting www.auto-europe.com to understand the rights and responsibilities of driving in a foreign country.

As the IIABA also notes, by purchasing the rental company’s Collision or Loss Damage Waiver, you may be able to walk away from an accident without further worry and can proceed with enjoying your trip or vacation.