Most people do not really understand the additional coverage rental agencies tend to push on them, and usually automatically say no. What you may not realize though is that coverage could be your saving grace in the event of a serious accident. I spent the first seven years of my insurance career in claims for a large rental car company so I dealt with claims for people who did not purchase the extra liability coverage, and you would be surprised at what some people ended up paying out of pocket.
Prior to discussing why you should take the additional insurance, it is important to understand the typical coverages offered on most rental car contracts.
Damage Waiver (DW)
Often abbreviated DW, or CDW in California, this is the coverage that protects the rental car, and the rental car only. If you slam into a wall, a tree, etc, this only pays for repairs to the vehicle. Typically around $8.99 or so per day, it takes the place of your own collision coverage.
Personal Accident Insurance (PAI)
This coverage can go by varying names and may not be offered in all states. PAI covers medical treatment for you and the occupants of your vehicle in the event of an incident. There is usually a limit like regular med pay coverage, but you would need to check the specifics with the rental agency. This coverage is often inexpensive, around $3.99 a day.
Supplemental Liability Protection (SLP)
The additional liability coverage offered by rental car agencies is a big one. This option is most commonly overlooked, sometimes ending in disaster. SLP, or supplemental liability coverage, usually runs around $8.99 a day as well, depending on location and typically provides additional liability coverage of up to one million dollars.
Why Do I Need to Purchase Additional Coverage?
Most people instantly reject purchasing any additional insurance because they claim their credit card covers everything, or they claim they have their own insurance. Guess what? Many credit cards deny coverage and in a number of cases, personal insurance companies have denied coverage for accidents occurring in rental cars as well. Here are a couple points to keep in mind on whether you might need to purchase additional coverage.
- Credit Card Protection: 99% of the credit card coverage that people allude to only covers the damage to the rental car. It does not cover any damage you have done to anything (property damage) or anyone else (bodily injury). Your own personal insurance would have to kick in for liability coverage. Be sure to double check with the card before you travel as it may not cover some states, countries, or types of cars.
- Personal Insurance: It is prudent to check with your carrier on what coverage you do have while driving a rental car, or other non-owned auto. You might be surprised to learn your own insurance will not cover you in a non-owned auto. In most cases (depending on state), the insurance "follows the vehicle". That means your insurance company will be looking for the rental car agency to provide any coverage before they step in to handle the claim. For those who have assigned risk policies, there may not be any coverage while driving any vehicle not specifically listed on your own policy. And the other thing to consider, what is the reason you are renting a vehicle? Many policies have language that states they will only coverage you in a rental vehicle if your listed vehicle is inoperable, meaning in the shop or broken down. When I was working for the rental car company, I used to rent luxury cars for weekend drives to Vegas since I had a nice employee discount perk. As an employee, we were required to take out the extra insurance if we rented with our employee discount so I never really worried. However, if I did not take that extra insurance and had an accident occurred, there is a good chance my own company might have declined coverage since I was not renting a vehicle to replace my own primary vehicle.
- Personal Insurance Deductibles: So many people say the additional insurance is a waste of money when you have your own coverage. Stop and think about your deductible amount for a minute. With the current state of our economy, people are lowering coverage amounts and raising their deductibles to reduce their premiums. If you have a $500 or $1000 deductible and the extra rental insurance only totals $100, I would recommend taking the extra insurance. While it’s a gamble, because you obviously hope nothing will happen while driving the rental car; however, driving in unfamiliar locations, especially busy city highways, raises your chances of getting into an accident. If that happens, you would have to pay your entire deductible, not to mention have an at-fault accident now on record with your carrier. That could easily raise your premiums the following policy term.
Also, do not just think of your deductible amount only, but factor in what your liability limits are. For example, if you carry the California minimums of $15,000/$30,000 and cause an accident in another state, like Nevada, with ridiculously expensive medical treatment costs, your limits could be wiped out after only minor to moderate injuries to a family of four.
Any time a personal carrier denies coverage for an accident in a rental car, depending on state laws, the rental car company will step up and handle the loss. Typically, all rental car contracts contain indemnity clauses, which means the rental car company can come after you for any damages they had to pay out on your behalf. Imagine a scenario where there is $4,000 for damage to the rental car and $20,000 in injury payments, and then magine being the one receiving that notice in the mail! It can and does happen, far more often than you think.
The next time you are planning to rent a vehicle, do your research with your credit card and personal insurance companies to see what coverage you do have. If there are any concerns or doubt, take the extra insurance so you can enjoy your vacation with the peace of mind knowing you are fully covered in the unlikely event something does happen.
