Rental Car Accident Insurance
Credit Card, Personal Auto Policies May Not Cover All Losses
Personal auto or credit card insurance policies sometimes pay rental car claims. Know what they do and don't insure before declining a car renter's CDW or LDW coverage.
Many renters decline the collision and loss damage waivers offered by car rental firms and assume that coverage afforded by their credit card policies will protect them. But that can be risky.
Credit Card Rental Car Insurance
- Credit card insurance is usually supplemental, which means it only reimburses for loss over and above what is covered by any other insurance the driver carries. The card company may deny a loss payment if a renter has a personal auto policy, or bought the rental firm's CDW/LDW.
- The card usually covers only damage or loss to the rented vehicle, not other cars, personal belongings, or the property of others. There may be no personal liability coverage for bodily injury or death claims.
- Some cards lack any car rental insurance protection, especially debit cards and those with low credit limits.
- Coverage can change, be spotty or incomplete. One card might cover damage but not theft, and another card might not cover either. Coverage may apply in some countries but not others.
- Card company call center staff may be misinformed about current coverage details, which are governed by formal insurance policies not easily available to cardholders. It may be difficult to know exactly what coverage the card provides, until it’s too late.
Personal Auto Policy Rental Insurance
- A personal auto insurance policy (PAP) extends damage protection to rental vehicles only if it’s a “full coverage” plan, meaning it insures against losses due to collision and other than collision (a.k.a. comprehensive). A minimal PAP--that provides only liability and uninsured motorist protection--will be useless if the rental car is damaged or stolen. PAP liability protection pays only for damage to other vehicles and property.
- A full coverage PAP usually pays the lesser of a vehicle’s “actual cash value” (i.e., its depreciated blue book price), or the amount necessary to repair or replace the lost or damaged property, less its deductibles. But the rental agreement may require a renter to reimburse the company for the full retail value of the vehicle after an accident. If that assessment exceeds a lower appraisal by a claims adjustor working for the PAP insurer, the driver would have to make up the deficit. In any event, if a PAP insurer pays a sizeable rental car loss claim, it may raise its rates, or not renew the PAP.
- Many PAP insurers don’t reimburse for “loss of use,” a charge the rental firm may legally recoup for income it forfeits because it can’t rent the vehicle while it is out of service for days or weeks being repaired or recovered. State Farm offers a "Use of Non-Owned Cars" endorsement that pays for loss of use and administrative charges.
- A PAP insurer may have the right, under terms of its policy, to inspect and appraise a damaged vehicle before repairs are made. The rental company, which has no obligation to an outside insurer, may fix the damage immediately. Then, the PAP insurer could deny coverage for failure to comply with this contractual condition.
- A rental firm may collect for its damaged car's diminished value, which means a repaired vehicle is inherently less valuable than an undamaged factory original. (Indeed, Carfax often tracks major wrecks and repairs). Since most PAP insurers are not obligated to pay for diminished value, the renter makes up the deficit.
Declining the rental firm’s CDW or LDW can sometimes have an unintended consequence. Upon learning of an accident or loss, a rental firm may immediately charge its customer’s credit card for the full value of a loss, up to the card credit limit. Be aware that when relying on coverage not sold by the car rental firm, settlement of a loss or damage claim may linger, and the account might be temporarily maxed out until the matter is resolved. Carry a backup card in case an accident or loss occurs far from home.
The copyright of the article Rental Car Accident Insurance in Automotive Insurance is owned by George Daleiden. Permission to republish Rental Car Accident Insurance must be granted by the author in writing.
