A rental vehicle agreement is a largely one-sided contract few read, let alone understand. A lawyer knowledgeable about the subject once quipped that anyone who really understood the contract's fine print would never rent a car.
Let The Buyer Beware
Keep in mind these facts whenever renting a vehicle:
- The renter is always responsible for any loss or damage to a rental vehicle, regardless of who is at fault. For example, if the rental company's parking valet damages the car just minutes after the agreement is signed, the renter is responsible! Many drivers assume that a rental company will sympathize with a blameless renter, but that's generally not true. All it cares about is its car, or the retail cash equivalent.
- A signed rental agreement is a legal contract that protects the interests of the rental company’s property, not the driver.
- Rental companies often value their vehicles at full retail value, which can be much more than depreciated actual cash value (bluebook).
- Declining the rental firm’s coverage, and instead depending on a personal auto insurance policy (PAP) or protection perks built into a credit card, can leave coverage gaps.
Insurance offered by the rental car company
At the rental counter, the agent will offer CDW, LDW, SLI and other “insurance” options, packaged or a la carte, all at an extra cost. The options usually are not, strictly speaking, insurance at all, but waivers. A waiver is the relinquishment or forfeiture of a right: the rental company agrees, for a hefty price, to waive its full right, or portion thereof, to demand restitution if the renter damages its car, or totals it, as in a flood or fire .
Anyone can sell a waiver, even those who know little or nothing about insurance. In all states, only licensed agents can legally sell insurance or advise, interpret and counsel about what a policy does and does not cover. If a rental agent is not a currently licensed "P&C" (property and casualty) agent, do not rely on their judgments on vehicle insurance issues, or expect their opinions to have legal weight.
These are the common coverage options offered by vehicle rental firms
- Loss damage waiver (LDW) or collision damage waiver (CDW). Generally these mean the same thing. Drivers who select and pay for this coverage are insulated from the rental car firm coming after them and collecting for damage to or theft of the rented vehicle, as well as towing expenses, storage and administrative fees, and "loss of use" charges associated with an accident.
CDW and LDW only cover the rented vehicle. Neither protect against damage to other cars or property, or for death or bodily injury to anyone involved in an accident.
Full LDW/CDW is expensive, but it is essentially a zero-deductible bumper-to-bumper physical damage policy that usually covers a total damage or theft loss. Read the fine print for conditions or exceptions. For example, CDW may be void if an accident involves speeding, an unauthorized driver, driving off-road, on unpaved roads or while intoxicated.
- Partial LDW is cheaper than full LDW, but be careful. Partial LDW stipulates that the rental firm waives (agrees not to charge) a set amount, typically from $500 to $3000, for damage to the vehicle, and the renter pays for any excess, often up to the full retail value of the vehicle. For example, consider a rented SUV with a retail value of $35,000 and a bluebook value of $30,000. If it were stolen and never recovered and the renter carried LDW $500, the rental company would waive $500, and the renter would be liable for the $34,500 difference. A driver with a typical full coverage personal auto insurance policy (PAP) that reimburses based on bluebook value could expect their carrier to pay at most only $30,000 of the deficit, forcing the driver to write a check for the $4,500 difference. PAP policies vary, so check first.
- SLI—supplemental liability insurance. This coverage protects rental drivers against claims and lawsuits for bodily injury and death, and damage to property other than the rented vehicle. Renters not carrying similar liability protection via their personal auto or credit card policies should strongly consider selecting this coverage.
