Additional insurance on rentals is optional, but should you purchase rental car insurance on your next adventure?
Should I Buy Insurance From the Rental Car Agency?
MG – Yes, and it’s actually a question we get all the time in personal lines. Should I purchase the insurance offered by the car rental agency? It’s a big question, we get it all the time, and the answer is you don’t have to, but we normally recommend it. This is one of our most frequently asked questions and it gets a little tricky.
Of course, if you do not have current auto insurance, the answer is 100% yes, purchase the insurance from the car rental agency. If you do currently have auto insurance, then that’s where it gets a little tricky. So with that being said, your liability limits from your auto policy do extend over into the rental car. If you have an active auto policy, your coverages and limits will normally extend. But we still recommend purchasing the insurance offered by the agency. And there are a few reasons for this.
Like I said, most coverages will extend to the rental car. So as far as liability, which includes the bodily injury and the property damage, that would extend. If your regular auto policy carries comp and collision, you will be covered for the physical damage to the vehicle. And the same for the uninsured motorist. But, and this is where it gets tricky, if there’s an accident and there’s damage to the vehicle, most insurance companies will not cover for the loss of use of that vehicle.
Loss of Use
CM – And this is the loss of use, not of you, but of the company you rented it from.
MG – Right. So you caused an accident in this vehicle and now this vehicle is out of commission for two weeks because they have to repair it. The rental agency is not going to be very happy with you at that point. And so they want to charge you for the two weeks that it’s out of service.
CM – They charge you by the same amount that you would pay if you were renting it.
MG – Right. So with that being said, it could be hundreds of dollars out of your pocket that you’re paying for this car to be repaired, or at least for the time it’s out of service. And so that’s what I mean when I say they’re not going to pay for the loss of use on that vehicle.
Benefits of Purchasing Rental Car Insurance
CM – I’ve rented quite a few cars lately and it’s one of those things where you’re at the counter and they’re like, ‘Would you like to buy the insurance for an extra $150?’ and you’re like, ‘Ah, gosh, I’m already paying so much.’ But in a way, if there was an accident, having the insurance through the rental car company can save you time too. Because you’re not filing the claim, you’re just bringing it back and saying, sorry, I backed into that guy, or somebody was tailgating me too close and rear-ended me and then they have to take care of it.
MG – So yes, you’re right, at that point you bring it back to them. You say, I hit somebody, here’s your car back. And I believe at that point they would go as far as filing that claim and stuff for you. But that’s where another fee comes in that they will charge you, that your auto policy will not cover. And that is an adjustment fee. That’s for filing the claim, and usually that’s anywhere between $200-$400. So that’s another fee that you’re going to be paying for out-of-pocket, which could rack up.
CM – If you don’t buy it from the rental car company, right?
MG – Yes, if you don’t buy their insurance.
CM – So I know it’s a pain in the butt. We’ve talked about this in the past and actually Rex has a pretty good story. We were back East and we had my grandmother in the car, me in the back of the car, and my mom. I think we stopped at a Rite Aid because my grandma needed Tylenol or something. We’re running around and he goes to back up and we’re in this big van with the sliding doors on the side because we’re a motley crew, it was easier for my grandma to get in and out of. He backs up in this parking lot and he smashes right into this huge light pole.
Of course, the first thing my mom says is, ‘What? You didn’t see that?’ And I know that he did purchase the insurance and it’s because he’s in the insurance industry. He knew better, but also it’s because he had a previous experience where he didn’t, and it was very expensive. And so this isn’t the first time that my dad has had an accident in a rental car. And you never think you’re going to get in an accident when you’re renting the car, you’re a good driver.
But in the end it’s a new car. It’s not the car you normally drive every day. So little stupid accidents can happen. Like, are you going forward or do you have it in reverse? Or, oops, I pressed the gas instead of the brake, that one is super common. Do I have my lights on correctly? It goes on and on and on. So paying the extra money, I know it hurts when you’re at the counter and they ask you and you have to say yes. Especially when, like Mary said, you have some of these coverages on your current auto policy.
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Diminished Value of the Car
MG – Another coverage though that’s not covered is if you were to damage that vehicle and it diminishes the value of the car. So say it’s a $10,000 car, you wreck it and by the time they repair it, it’s only worth $5,000. The rental agency is going to charge you that $5,000 that the value of the car diminished.
CM – So it is adding up. You’ve got the fee for non-use that the company could charge you. You’ve got the adjustment fee, and then you might also have that fee for diminished value. And we’re talking a couple hundred to a couple thousand dollars on each one of these fees. It’s worth it to buy the $150 policy from the rental car company. Let them deal with these headaches for you. It’s a good idea to get their insurance. But if you absolutely can’t, know that you do have some coverages from your auto insurance policy.
MG – And like I was saying, your liability limits will extend over to the rental car. If you have comp and collision on your current auto policy, that will also extend to the rental car.
Renting a Trailer or U-Haul
CM – What about if you’re renting a trailer, like from U-Haul?
MG – Usually with a trailer, if you’re pulling it with a covered car, a car that’s on your policy, your liability limits will extend to the trailer that you’re pulling.
CM – I don’t know how many people just have to rent a trailer to move. I feel like you’ve got to buy the whole U-Haul, or a box truck. I’m so glad we were able to answer this question because it is one of the more popular ones. Thank you, Mary, and I’m pretty sure we’re going to have you back because you did an excellent job. Again, if you have any questions about your personal lines, give Mary a call at 1-800-452-6826. You can also visit us online at www.bancorpinsurance.com.
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