The Pros and Cons of Car Rental Insurance

How to ensure clients’ protection when renting a vehicle

The question of rental insurance comes up nearly every time one of your clients rents a car, and the decision can be a difficult one: What are the odds that the car will be involved in an accident, and how much insurance would actually be necessary? Rental insurance can often feel like a waste of money, especially when it seems to cost as much as the car rental alone.

“Many times, purchasing full rental insurance is unnecessary,” says Cathy Lewis, MetLife Auto & Home’s national rental coordinator. A rental car qualifies as a “non-owned automobile” under most personal auto policies, she explains, meaning that a vehicle’s coverage carries over to any vehicle that a driver rents. And if a personal policy doesn’t provide coverage, a credit card might. Most credit card companies commonly provide insurance protection for rental cars, if the full amount of the rental is charged to the card. This is generally called “secondary” insurance, because it will only pay when one’s personal auto policy does not. Consumers should always check with their creditors to confirm the services provided, and the coverage limitations, before renting the car.

But even with these existing protections, Lewis cautions, there are times when additional insurance coverage may come in handy for your client. To that end, a collision damage waiver and liability insurance can be very helpful if the unexpected occurs.

With a collision damage waiver, the rental company agrees not to hold the renter responsible for accidental damage or loss, as long as the conditions of the contract aren’t violated. If the driver’s creditor or insurance agent can confirm that any damage would be covered by the credit card or an existing policy, they can skip the waiver. In addition, “partial collision damage waivers” are available in some states, which will cover the cost of any deductible that the automobile policy contains.

Rental companies offer the option of purchasing liability insurance, although personal auto policies already provide liability insurance in the event someone is injured in an accident. The additional amount of coverage can vary, but keep in mind that if the state where the accident occurs requires higher minimum limits than what one’s personal policy affords, auto insurers are legally required to provide that state’s minimum level of coverage.

Also bear in mind that if the vehicle needs repair work, a personal insurance policy may not pay for the loss of rental income while the auto is out of service, or for “incidental” items such as towing, storage and any administrative costs that the rental company may incur.

In all cases, the best bet for your clients is to place a quick call to their insurance carrier or local insurance agent before leaving on vacation. “Your local insurance expert can probably tell you in five minutes all you need to know about your rental insurance needs for any given trip,” says Lewis. “That quick call could save you some grief later on down the road.”

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