How to Reduce Your Liability After Your Rental Car Accident?
The time to contemplate the ramifications of getting into an accident with a car rental is before one happens.
You’ve undoubtedly heard that saying “An ounce of prevention is worth a pound of cure.”
But when it comes to car rentals, that’s more than a saying – it’s a virtual strategy. The steps you take when you first rent the car will determine the outcome of the accident.
There are several options to cover the liability for damages or injury that might happen with a car rental.
And generally speaking, you’ll need a combination of two or more.
Here are the basic options:
Your Own Personal Auto Insurance Policy
Your personal auto insurance policy is your first line of defense if you get into an accident with a car rental.
A typical auto insurance policy will cover car rentals.
However, you should never make that assumption. If you’re about to rent a car, check your policy or call the company to make sure it includes rentals.
Even if it does, you’ll need to know of any limitations.
Generally speaking, your own personal insurance will offer identical coverage in the case of a rental. That includes liability, and collision and comprehensive coverage.
However, limitations may apply to the type of vehicle you rent.
For example, if your policy covers your Toyota Corolla, and you rent a BMW, your policy coverage may not apply to the rental.
The reason is that you are paying for coverage for a car that’s worth X, but renting a car that’s worth X+.
That means the coverage you’re carrying is insufficient for the vehicle you’re renting. As well, certain vehicles may be specifically excluded. This will usually apply to either high-end luxury cars, or a sports car. The exception of course is if you already own and cover one of these vehicles.
Another limitation is the location of the rental.
While your regular auto insurance policy may cover rentals in the US, the coverage probably won’t extend to those taken in foreign countries.
Even if you’re pretty certain your policy covers rental cars, always make a phone call a few days before to make sure there haven’t been any changes.
But there’s a great big caveat here.
Some people drop collision and comprehensive coverage on older vehicles. If you do, your regular insurance will only cover liability, and not vehicle damage.
Even if you’re fully covered on a rental car, your deductibles will apply.
Purchasing Coverage from the Auto Rental Company
Let’s start with this:
Car insurance purchased through a rental company can be very expensive.
It’s not unusual to get a very good rate on the rental, say $20 a day, while the daily rate on the insurance coverage is more than $30. That turns your bargain car rental into a $50+ per day affair. If you’re renting a car for a full week, that can turn a $140 charge into $350. That’s why it’s so important to avoid this option if you can.
There are at least two situations in which you may need to choose this option.
- You don’t have collision and comprehensive coverage with your regular auto insurance policy.
- You don’t have auto insurance at all. (Which is not likely, since New Hampshire is the only state in the country that doesn’t require car insurance, although even that state does require it if you have a loan on the car.)
In either situation, the car rental company will be unlikely to approve the rental unless you purchase coverage directly from them.
You might want to take the rental car company coverage if you want to avoid making a claim against your own company.
The advantage with direct car rental insurance is that if you take the coverage, and you’re involved in an accident, you’ll be fully covered.
Once you return the car, you’ll be done.
Rental Agency Collision Damage Waiver
This one type of coverage a rental car company will offer that you might consider.
The cost of the collision damage waiver is usually much lower than purchasing a full protection policy.
It’s called a waiver because it isn’t actually insurance. It’s a fee you pay to be released from financial responsibility in the event you damage the car.
As discussed in the previous section, your regular car insurance policy will have a deductible. If you take the collision damage waiver from the rental company, the deductible will be covered, and your regular insurance will cover any excess.
But there’s an even better reason for taking the waiver.
A car rental company can charge you for loss of use of the vehicle while it’s being repaired. The loss of use represents the income the rental company will lose during the duration of the repair. How long that repair will take, and what the actual determination of the anticipated daily rental income will be completely out of your hands. The collision damage waiver will remove this complication.
If there’s no loss of use provision in the car rental agreement (but there almost certainly will be), or you’re not concerned about it, there’s a way you can calculate whether paying for the waiver makes sense.
For example, if the waiver is $20 per day, you have a $500 deductible on your regular auto insurance policy, and you’re renting the car for five days, the cost of the additional coverage will be $100. Should you get into an accident, the waiver will save you $400 on your deductible. In that situation, accepting the waiver makes financial sense.
But fortunately, there’s an easy strategy to get the collision damage waiver without paying for it.
Credit Card Collision Damage Waiver
Many major credit cards cover the collision damage waiver on rental cars as a benefit to cardholders.
By renting the car using the credit card, and declining the waiver offered by the rental company, the coverage will be automatic.
(We can even assume the credit card issuer is offering this coverage as an incentive for you to choose their card when you rent a car.)
But just as is the case with your own personal auto insurance policy, be sure to verify you have the benefit before charging the rental on your credit card.
The collision damage waiver from your credit card company will only be effective if your regular auto insurance policy extends the rental cars. The waiver is just to cover what your regular policy doesn’t.
Just as is the case with regular auto insurance policies, you’ll need to check with your credit card carrier to see what limitations apply.
For example, while the waiver will be available with most credit cards in most countries, certain countries may be excluded. There are also vehicle limitations. These usually include luxury vehicles (retail value of greater than $50,000), antique vehicles, trucks, recreational vehicles, and any vehicle capable of carrying more than eight people.
There are a small number of credit cards that even offer primary auto insurance coverage for rentals.
One example is Chase Sapphire Reserve. It provides up to $75,000 in coverage, and does not require you to file a claim with your regular auto insurance before receiving benefits.
Prioritizing the Various Options
You can follow a general order in determining the insurance coverage you’ll need on a rental car.
- Start with your regular auto insurance policy. This will represent your primary coverage, and will cover you for liability, as well as collision and comprehensive, if these benefits are included. But your claim will be subject to your policy deductible.
- Credit card collision damage waiver. This will represent secondary coverage, and you can get it by paying the car rental using the card, and refusing the waiver offered by the rental company.
- Choose the collision damage waiver offered by the car rental company. This will of course add to the cost of the rental, but the money you’ll save in the event of an accident will prove it to be money well spent.
Other Tips to Keep in Mind
Just because you have coverage, even from your primary auto insurance company and the collision damage waiver from either the rental company or your credit card company, doesn’t mean you’re covered against every event.
Here are some points to be aware of:
- You’ll need to be aware of what each coverage level specifically includes, and what it excludes. Never assume coverage means everything is included.
- Certain at-fault accidents may not be covered under the collision damage waiver of either the car rental company or your credit card issuer. For example, if you were involved in an accident that was the result of gross negligence on your part (reckless driving or driving under the influence) you may not be covered.
- Even if you purchase full coverage through the car rental company, your regular auto insurance company may increase your premium if you’re involved in either a moving violation or an accident with the rental car.
- If you do get into an accident, or encounter damage to the vehicle, you’ll need to report the situation immediately to any and all insurance carriers. If you wait until you return the vehicle to the rental company, the coverage may not apply.
The basic rule of thumb when it comes to protecting yourself from an accident with a car rental is to be prepared in advance.
Check with your regular auto insurance policy, as well as the collision damage waiver offered by your credit card company.
If you’re going to use the coverage provided by the car rental company, be sure to read all provisions carefully, and know exactly what’s covered.