Do You Need Car Rental Insurance? Not Exactly

You catch your flight, arrive at your destination, get to the car rental counter — eager to get a vehicle and get on with your vacation — and then, you get asked the dreaded question: “Do you want insurance coverage on your rental vehicle?”  What to do?  You know you have regular car insurance on your vehicle back home, but you wonder if that applies here?  And even if it does, is it sufficient?  Or should you nonetheless get one-time coverage for this occasion?  With summer travel plans in full swing, this common dilemma is sure to occur, especially for the infrequent traveler.

Domestically, most carriers allow the full transfer of one’s regular auto insurance to cover a rented vehicle, too (unless it’s used for business or commercial purposes).  Generally-speaking, this should be sufficient if such normal coverage is adequate.  Besides, if one’s regular auto insurance is lacking, then that is the place to make improvement and not just when renting.  International travel is different, and typically one’s auto insurance does not cover overseas rentals.  Of course, if someone has no auto insurance to begin with — a city dweller who relies on taxis or other transportation — then this too would obviously influence decisions.

There are four main types of car rental insurance coverages to consider.  Loss/collision damage waiver — which is usually the focus of scrutiny.  This involves coverage for accidents while driving and comprehensive for damage done by non-driving things like fire, theft or vandalism.  Liability — which is required by state law on one’s regular auto insurance, while many people also carry additional “umbrella” coverage that further reduces the need for this type of rental coverage.  Personal accident (for medical costs) — and usually normal health insurance can suffice here, plus any additional similar provisions on one’s regular auto policy.  And finally, personal effects to cover items that are stolen from the vehicle — and most homeowner’s (or renter’s) policies provide for this kind of protection that goes wherever you go.

Many credit card companies also provide some degree of extra one-time rental insurance if the card is used to pay the bill.  This coverage, though, is for damage and not personal liability.  Indeed, the whole matter of personal liability is probably the most important overall risk management consideration regarding vehicles, and getting this proactively right is important – both with one’s auto policy and any supplemental coverage.  Additionally, people with older cars often let their collision/comprehensive coverage lapse because it’s hard to justify such premiums on depreciated vehicles, and this type of coverage may be missing at the time of renting.

It could still make sense to elect the loss damage waiver just for hassle factor reasons and to avoid any headaches when returning the vehicle – perhaps damage from skidding on ice during a winter ski trip, or a heavy coconut dropping on the hood during summertime.  Should events like those occur, you simply hand back the keys and walk away.  And, this waiver usually covers loss-of-use charges while the damaged vehicle is being repaired.  Like so many things in life, though, the bold print giveth and the fine print taketh away!  Each person’s situation is unique and requires careful individual inspection.  Similarly, this short article is but a brief general summary of a topic worthy of further analysis with your financial advisor. Happy trails to you!

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