Have you ever stood at an automobile rental counter while traveling staring at a rental contract trying to figure out what the insurance options mean? “Should I buy additional coverage through the rental car company or am I paying for coverage I already have based on my insurance coverage for my own vehicle?”
Consider the following information the next time you rent a car while traveling or need a replacement while your vehicle is being repaired.
Your Primary Insurance Coverage
As a general rule, your automobile insurance coverage on the vehicle you own or lease will cover you on the same terms with respect to repairing physical damage (less applicable deductibles) to a vehicle in an accident and liability coverage concerning potential injuries to third parties.
As a result, depending on your insurance coverage and the various deductibles and limits in the policy you carry on a vehicle you own or lease, many of the “supplemental” coverages offered by the rental agencies are unnecessary and probably a waste of money. However, there is on exception.
Auto Rental Collision Damage Waiver
One exception to the general rule that your primary insurance is adequate to cover your risks of loss in automobile rental situations is a program offered by all automobile rental companies known as “Auto Collision Damage Waiver” or sometimes referred to as “Optional Damage Waiver”. This program is not insurance but rather a contractual provision where a rental company, in exchange for a fee usually in the form of a daily charge, agrees to assume all of the risk for any physical damage to a vehicle while in your control as well as waiving or covering payment of other fees usually buried in the rental contract fine print such as administrative fees, loss of use fees and surcharges imposed by a rental company when a vehicle is damaged.
Purchasing a damage waiver from the rental company essentially takes away any chance your own insurance company would have to pay any claim for physical vehicle damage and the program insures that you will not have to pay any deductibles, administrative fees, loss of use charges and other surcharges that your own insurance would not cover. The “damage waiver” provision does not apply to liability issues with respect to injuries to third parties but, rather, only the physical damage to the vehicle.
Let’s Consider An Example
If you rent a vehicle on vacation or for business and you are involved in an accident resulting in $5,000.00 damage to the vehicle, your financial responsibility would be as follows:
Check Your Credit Card
If you pay for your car rental with a credit card,many credit card companies offer the physical damage waiver as a benefit of your card membership. This would allow you to decline purchasing the program from the auto rental company while still enjoying the protection from your credit card company.
Dan A. Penning