Renting a car for vacation or after an accident; what insurance do I need?
Most commonly people find themselves renting a car either while on vacation or when their car is disabled. Regardless why, many of decisions you face will be similar when face to face with the rental sales representative. If you’re a typical consumer, you wouldn’t even think about car rental insurance until you arrived at the rental counter. Then panic sets in as you face the scenarios presented by the sales person and the costs they are rattling off. Remember they are paid a commission for the extras they convince you to purchase!
Under RI General Law, when you rent a car that is used as a substitute for a vehicle covered under your personal auto policy, the coverage is transferred to the rental car. In short, a person with a Rhode Island based policy can rent a car within the continental United States with their auto insurance policy extending to the rental car. But there are gaps that can burn you.
Rhode Island law is unique from most states in that the Property Damage Liability limit on your policy is utilized to pay for the damage done to your rental car. The damage to the rental car is covered whether or not you have Collision or Comprehensive (aka All Other Coverage) coverages on your personal auto. But make sure your Property Damage Liability limit is sufficient to pay the cost to repair both your rental car and all of the other property you could damage in an accident.
When you do have a loss, even just a cracked windshield, you will discover two major gaps between your personal coverage and what the rental car company is going to charge you. They will keep charging you their daily rental rate until their car is repaired. They will also likely seek damages for the diminished value of the car. That is the reduced value consumers will pay for a used car that has an accident history. Both of these charges can be excessive and your auto insurance policy is not likely to cover those charges.
A benefit many credit card companies offer is to pay your deductible or other incidental rental car company fees. Check your credit card company contract to see what they may actually cover before you waive those extra coverages.
How long are you going to be traveling? Under RI law, your coverage for the rental vehicle is valid for a maximum 60 running day period. When you go to Florida next winter, if renting a car for your three month stay, you will need to enjoy that stay with two separate rental contract periods to cover the 90 days. Rental companies likely do not know the limitation of RI’s law.
What kind of vehicle are you planning to rent? It doesn’t matter if you’re renting the car of your dreams while your car at home is a 10 year old junker; the car is covered. If you rent a Home Depot pick-up truck (with less than a 10,000 pound GVW) to bring your latest renovation project home, your auto policy should be expected to provide the coverage you need. If renting a U-haul truck rated for over 10,000 GVW to carry your child’s belongings to college, you will likely need the rental coverage for that use. It is classified as a commercial vehicle and excluded from the automatic coverage extension of the law.
So what are some of the coverages the sales person is going to try to convince you to purchase?
- Loss Damage Waiver (LDW): Sometimes referred to as a collision damage waiver. The LDW is not an insurance product. For a fee, the rental company agrees to waive your financial responsibility if their rental car is damaged or stolen. They pay for loss of use while the car is being repaired, the towing, the repairs, the diminished value and their administrative fees. This coverage costs between $15-24 per day and allows you to hand them the keys and say “your problem, not mine!”
- Liability Insurance: Rental companies by law in most states must maintain minimum limits for liability on their cars– but yours applies first. You need to have liability coverage. Without proof of insurance, many rental companies will not allow you to take their car. If you have auto insurance, take a copy of your policy declarations page with your travel documents. If you have no personal auto policy, you can expect to pay $14 per day for this coverage.
- Personal Accident Insurance: This is the rental car industry’s way of saying Medical Payments coverage. Unless you specifically waived the coverage, it usually exists on your auto liability policy with a minimum limit of $1,000. I would encourage you to purchase Medical Payments coverage with a $5,000 or greater per person injured limit. They will charge you $1-5 per day for this coverage and it is usually for a $1,000 limit.
- Personal Effects Coverage: This coverage provides insurance for the theft of items in your rental car. If you have a homeowners or renters policy, it likely includes coverage for the off-premises loss of your personal belongings. The Homeowner policy is usually broader than offered by the rental car company, but theirs may offer no deductible. Their coverage will usually cost $4-6 a day.
How about renting a car after being involved in an accident? If you have rental coverage, the insurance company is going to pay up to your daily limit for a specific period of time—usually 30 days. A long as you do not cancel the insurance on the car that was damaged AND the car is determined to be unsafe to drive as is, the rental coverage will apply. Be cautious not to let your body shop convince you that it is necessary to leave your car with them simply so they can view it with the insurance adjuster. Rule of thumb, the insurance company is unlikely to pay for the rental unless the damaged car would not otherwise pass the RI State Safety Inspection. It may take weeks to get your parts in and a few more to do the repairs; exceeding your policy’s rental period means you pay for the extra days.