Rental Car Insurance – Is Your Own Auto Policy Good Enough?

Summer is coming and if you’re thinking about renting a car for vacation, you will be asking the age old question – “Should I purchase the car insurance from the rental agency?” The answer is – IT DEPENDS. If you do your homework before you get to the rental counter you can save yourself a lot of money. It really won’t take much time because while you’re shopping for a good deal on a rental you can also be checking out the insurance situation.

Actually your first call for renting a car will not be to the rental agency but to your own insurance agency. You need to find out what the extent of your auto insurance coverage is. Most auto insurance policies will extend to rental cars but insurance experts recommend inquiring about two things – collision damage waiver and liability. Also if you’re letting your teenager do some of the driving of the rental car, ask your agent and the rental agency about coverage.

Collision damage waiver, or CDW (as it often appears on rental contracts) covers any damage to the car you are driving and liability covers damage you do to someone else. You need to ask your agent if there is a limit on your collision insurance. If you regularly drive an older car but rent a brand new luxury car (remember sometimes if a car is available you can upgraded to one of these types of cars for free), make sure your personal insurance policy will cover the whole cost of replacing the more expensive auto. If your policy doesn’t cover replacement cost and your car is worth $2,000 and you total a rental worth $20,000, you are on the hook for $18,000.

Frequently, consumers who drive older cars don’t carry collision at all. If this is your situation, you need to buy a policy at the rental counter or use a credit card that will give you this coverage. Consumer advocates recommend if you rent cars often you might get an estimate from your agent on a policy to cover you as it might be cheaper.

Now about that credit card…. Many major credit card companies say they will provide you with insurance coverage if you use their card to rent a car. READ THE FINE PRINT because they do not always offer full coverage. Some cards only cover you if you rent from a certain agency, some limit coverage to certain type of cars, some you have to enroll in a program to get the coverage, some may only reimburse you the deductible you would have to pay under your regular auto insurance and some may only provide collision and comprehensive and leave you hanging for personal injury or property damage to others. READ THE FINE PRINT or call and ask the credit card company. Extra advice here – get it in writing what your credit card covers.

What about the insurance the rental car company offers? Again, you will need to find exactly what they cover. Some rental car agencies offer collision, liability, contents and life insurance and others offer some version of collision. Their collision may cover everything or may exclude such thing as tires, wheels and glass. Find out beforehand, so you are not standing at the rental counter feeling hurried and trying to make these choices. If you’re worried about stuff get stolen out your car – check your homeowner’s policy to see if you’re covered.

Finally, some people think if they use the rental company insurance and they have an accident, they are protected from a rate increase from their insurance company. You are not protected. According some large insurers, if you are at fault, no matter who pays, your home insurance company can raise your rates.

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