Crash Course in Auto Rental Insurance

You're about to pick up your rental car. The agent, who's amiable but rushed, already has taken the necessary information from your credit card and driver's license.

Behind you, anxious travelers wait their turn, some distractedly drumming their briefcases, others trying to calm antsy children. Suddenly, the room is still. All eyes are on you. The agent has just asked what you want to do about rental insurance.

If you're wise, this isn't the first time that question has occurred to you.

Long before you pick up a rental car, you should know what arrangements to make for insurance. Not knowing could cost you thousands of dollars if something happens and you're not covered. But it also would be foolish to pay for coverage you don't need.

"Car rental agents invariably ask if you want to purchase an assortment of insurance products," says Nancy Castleman, a consumer advocate and co-founder of Good Advice Press, Elizaville, N.Y. www.goodadvicepress.com. "In addition to collision/loss damage coverage, you might be pitched a liability policy for $1 million, a personal accident death policy worth $175,000 for you and $17,500 for each passenger, and personal effects coverage for a total of, say, $1,500 in benefits."

Sound confusing? It's meant to. Car rental companies offer insurance to let their customers protect themselves in the event of an accident. Of course they also do it to make money.

Car rental insurance can add up to more than $30 a day and could double the cost of renting a car, depending on what coverage you take, what type of car you rent, and which company you're renting from.

A 2002 survey by the Mayfield Village, Ohio-based Progressive insurance companies found that 38% of consumers either sometimes or always bought car rental insurance--with 8% saying they did it because they felt pressured by the rental agent.

"It's important that consumers understand what they're already paying for and how it applies to a rental car. That way they can make a more informed decision about what they may or may not need to buy at the rental counter," said John Barbagallo, director of product development at Progressive.

Cover yourself

First, make sure that you have some insurance. When in doubt, opt for coverage.

But you shouldn't have any doubts. If you prepare yourself before you step up to the rental counter, you'll know just what to do to protect yourself without paying for insurance you already have.

Essentially, rental agencies offer four types of coverage, most of which you already may have through your existing auto, home, and medical insurance policies. Other protections may be available through your credit cards.

Here's what you'll be considering:

Collision damage waiver, or loss damage waiver. Technically not insurance, this is the rental agency's offer to waive your responsibility to pay for the vehicle if it's damaged or stolen. Typical cost, according to the Insurance Information Institute, New York: $9 to $19 a day.

Liability insurance. This is for rental vehicle accidents in which you're blamed for damaging other property or injuring other people. Rentals typically include minimal liability protection, but more adequate coverage is an add-on. Typical cost: $7 to $9 a day.

Personal accident insurance. This provides accidental death and medical benefits to you and your passengers when you're renting. Typical cost: $3 a day.

Personal effects insurance. If your luggage and other belongings in the rental vehicle are lost or stolen, this covers you. Typical cost: $1.25 a day.

Check your existing insurance and credit card coverage.

Existing plans

Your first line of defense against unnecessary rental charges is your auto insurance policy. Usually, the coverage you have on the automobile you own also applies to vehicles you rent in the U.S. Your collision, comprehensive, and liability insurance could protect you from damage to the rental and other property as well as from injuries to you or others.

In addition, home or apartment policies insuring against the loss or theft of your possessions often cover your personal effects away from home. Your health and life insurance also might provide benefits in the event of an accident in a rental vehicle.

Keep in mind that if your current coverage extends to your car rental, you probably will face the same limitations you have on your existing insurance. That often means your insurer chips in only after you exhaust all other coverage--including what you've bought from the rental agency. And any deductibles you have through your existing policies also would apply. Also consider that if you have an accident with a rental car and use your auto policy to cover damages, it could affect your insurance rates.

If you don't have car insurance and you rent cars often, consider getting a non-owner auto policy, which costs about $300 a year, according to the Insurance Information Institute. That could serve your needs for collision and liability protections and prove cheaper than buying the agency's coverage each time you rent.

Bottom line: Before you rent a car, find out how your existing insurance would cover you. Read through your policies or--as 64% of the consumers surveyed by Progressive said they'd do--contact your insurance agent.

Credit cards

Some credit cards include protections against damage to or theft of the rental car when you pay with the card and you decline the waivers offered by the rental agency. Often, the coverage is secondary to whatever your auto insurance policy pays for, but that could mean paying for your deductibles.

Bottom line: Call the toll-free customer service number on your card or find rental car coverage provisions on the Internet. Visa MasterCard American Express

Other sources

If you're traveling for business, find out about your employer's policies for car rental insurance. Also check with your travel agent or auto club to see whether there's coverage you don't know about.

With travel down and business off since even before Sept. 11, car rental agents might feel more pressure to push their insurance. That makes advance knowledge of your existing coverage all the more important.

"So be sure to ask your insurer and credit card company exactly what protection you already have before you pick up the car," Castleman says. "Otherwise, you may fork over an unnecessary wad of cash--or you may fail to purchase coverage you actually need."

Published January 27, 2003