A car rental agency is naturally protective of its assets. People may not drive as carefully in a car they don’t own, which leads to accidents. Because the agency needs the damage repaired or the car replaced, it generally recommends renters buy its provided insurance policy.
When you rent a car, though, you may wonder if you need to buy this policy or if your existing policy will cover the rental.
“The answer is yes and no,” said State Farm agent Pam Hansen Alfred. “Are you renting in the U.S.? At State Farm, we don’t extend coverage to any country except Canada and 25 miles into Mexico. Otherwise, the way it works is, if you have comprehensive and collision on a vehicle, that coverage will extend to the rental car if you have a claim.”
For instance, Alfred recently had a client whose rental car was stolen, a situation that a comprehensive policy would pay for after a deductible. Similarly, if you were in an accident or your windshield was damaged, the cost of any repairs would be covered after you paid your deductible.
Beyond these situations, though, you should discuss a couple of unique areas of car rental insurance with your agent to ensure you’re covered.
Loss of use
While your insurance will cover damage to your rental car, you may be on the hook for other expenses if a car rental agency experiences loss of use.
“If you wreck a vehicle and they can’t rent it out, they charge you for the amount of time it is in the shop as though you were still renting it,” Alfred said. “This cost would not automatically be covered by your car insurance. But you can add a coverage under your State Farm policy called unowned auto liability and property damage. The charge is pretty nominal. If the rental car company wants to charge you for loss of use, your policy will cover that if you have that endorsement on your policy.”
A second potential gap in rental car insurance, diminished value, could end up being essential.
“The scenario is you have wrecked your rental car and your insurance company has fixed it,” Alfred said. “Let’s say you did $5000 of damage to the rental car. But rental car companies don’t keep their vehicles very long and, when they go to sell it at auction, the auction place says this car isn’t worth as much because it has been wrecked and repaired. That’s when the rental car company turns around and charges you for the diminished value.”
Fortunately, you may not even need to involve your insurance company because your credit card company can come to the rescue.
“Major credit card companies like Visa, Mastercard, and American Express have a provision as a benefit that they’ll pick up the diminished value,” Alfred said.
One of Alfred’s clients experienced this situation. The diminished value was $19,000, and the client’s credit card company covered the full amount.
Avoiding a deductible
Even if you want your own car insurance to cover a rental, you could also sign up for the rental company’s insurance to avoid paying a deductible or avoid filing a claim on your personal insurance in case of damage.
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