What Insurance do I need when renting a car?
If you’re a typical consumer, you don’t even think about car rental insurance until you arrive at the rental counter. Then panic sets in as you face the scenarios presented by the counter sales person. Remember they are paid a commission on all the extras they convince you to purchase! Unfortunately, that panic results in you wasting money purchasing unnecessary coverage or possibly facing dangerous coverage gaps.
In short, generally a person with a Rhode Island based policy can rent a car in the continental United States with their auto insurance policy extending to the rental car. But there are glitches that can burn you.
Under RI General Law 27-6-7, when you rent a car that is being used as a substitute vehicle for a car covered under your personal auto policy, the coverage is transferred to the rental car. Your liability limits are transferred to the rental vehicle.
If you are one of the near 30% of Rhode Island drivers who have the minimum limits allowed by RI law, you want to be sure to check to see what the minimum limits are in the state(s) you are traveling to. If you are driving in a state that requires higher minimum limits than you have, you can be changed with driving without insurance. Also, once someone you’ve collided with discovers you’re driving a rental car, they may assume the rental car company has deep pockets to go after. Consequently, while driving the rental car, you may find yourself responsible for a bigger loss than while driving your car. You can either increase your current policy limits or purchase the rental car company’s coverage.
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 the 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 damage in the loss. A $50,000 Property Damage Liability limit is not likely to be sufficient for anything but a minor fender bender. Keep in mind the rental car company is going to keep charging the insurance company a specific daily rate while their car is being repaired. They will likely also seek damages for the diminished value of the car. These charges apply to the property damage Liability limit on your policy.
When travelling, a benefit many credit card companies offer is to pay your deductible or other incidental rental car company fees incurred as a result of a loss. Most Rhode Islanders have little use of this benefit. The coverage is particularly valuable when your auto policy is based in a state other than Rhode Island.
So how long are you going to be traveling? Under RI law, your coverage for the substitute, or rental vehicle, is valid for a maximum 60 day period. When you go to Florida next winter renting a car for your planned three month stay, your personal auto policy is not going to provide the coverage you need. In such a situation you have a couple options which can best be explained by your professional insurance agent.
What kind of vehicle are you planning to rent? It doesn’t matter if your car at home is a 10 year old junker and you’re renting the car of your dreams; the car is covered. If you rent a pick-up truck at Home Depot to bring your latest renovation project home, your auto policy is likely to provide the coverage you need. However, if renting a U-haul truck to carry your child’s belongings to college, you might need the rental coverage for that use. The rental coverage law stipulates that a truck must be less than 10,000 GVW to be covered under the automatic coverage extension 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. It usually includes “coverage” for loss of use while the car is being repaired, towing and their administrative fees. This coverage generally costs between $9-19 per day.
- Liability Insurance: The rental company by law in most states must maintain minimum limits for liability on their cars but that would not prevent someone from going after you for your negligence; 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 $7-14 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 already exists on your auto liability policy with a minimum limit of $1,000. I have convinced most of my insureds to purchase Medical Payments coverage with a minimum $5,000 per person injured limit. They will charge you $1-5 per day for this coverage and it is usually with 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. There is usually a limit that both policies will cover. The Homeowner policy is usually broader than offered by the rental car company, but they may offer a lower deductible. Their coverage usually will cost you $4-6 a day.