Your Insurance: Do You Need to Buy Rental Car Coverage?

One of the questions people ask most often is whether they should buy the coverage offered by a rental car company. There is no one-size-fits-all answer, but the basic options can be explained clearly.

Does my current auto policy protect a rental vehicle?

In many cases, yes. A rental car is usually treated as a temporary substitute for your own vehicle, so the limits and deductibles on your personal auto policy typically carry over. For instance, if your collision deductible is $500, that same deductible would generally apply if you damaged a rental car. The same is true for liability coverage if you damage another vehicle or cause injury or property damage to someone else.

What hidden charges in a rental contract may not be covered by a personal auto policy?

Rental companies may try to recover a “diminution of value” charge after a rental car is damaged, reflecting the drop in resale value because the car has been in an accident. In some cases, they may also sell the damaged vehicle for salvage and bill the renter for the difference between the car’s value at the start of the rental and what it brought at auction later. Even when your own insurance covers the physical damage, the rental company may still seek payment for the time the car is unavailable for rent, often called loss of use.

What is a Loss Damage Waiver, or LDW?

The add-on offered at the counter is usually called a Loss Damage Waiver, or LDW. It is not insurance. Instead, it is a contract in which the rental company agrees to waive your responsibility for certain damage, for an added fee. If you purchase it, you generally will not be charged for repairs, diminished value, before-and-after appraisals, or loss of use. That protection usually applies unless you violate the rental agreement. One drawback is the cost, which can sometimes approach the price of the rental itself.

Does a credit card provide coverage?

Only some credit cards offer any rental car protection, and even then it is usually not primary coverage. That means your auto insurance would normally pay first before the card issuer steps in. This benefit is often misunderstood, and unless it comes through a specific program, such as one offered by American Express, it is not wise to depend on it alone.

Should I accept the coverage offered at the counter?

The best approach is to check with your insurance agent to make sure your personal auto policy applies to a rental car, with the exceptions noted above. Then compare the price of the Loss Damage Waiver and decide whether it is worth it for the trip. On a once-in-a-lifetime cross-country journey, some travelers may prefer the peace of mind of avoiding a claim with their insurer and sidestepping rental contract issues that a personal auto policy would not cover.

Flury-Hinderks Insurance is an independent insurance agency in Overland Park and a trusted advisor for thousands of families in Johnson County. Contact Flury-Hinderks Insurance for a comprehensive insurance review.