11/25/2014 1:10 PM

Do I Need Rental Car Insurance?

Renting a car is among one of my least favorite experiences.  I always remember renting a car at the beginning of my honeymoon.  We stood in line for what felt like hours (and was definitely more than an hour) for a car.  After all that waiting, when we finally reached the front of the line, they hit us with a ton of questions.

One of the biggest questions is “would you like to add insurance to your rental vehicle today?”  If you’re like me, you ask yourself, “Do I really need to pay for this?”  Before I worked here, I never knew how to answer that question.  It seems a difficult one, since you already carry auto insurance for yourself. It should transfer, right?

Well, that actually depends.  Your car insurance coverages, liability, comprehensive, collision, will most likely transfer to the rental car.  HOWEVER, that will not always be true!  It depends on where and how you use the rented vehicle.

For example, if you're doing business while away, your personal auto policy may NOT cover you or the rented car.

And, you may travel to a country or territory that's excluded by your policy.  Quick rule of thumb, don’t go to Mexico in your car. Ever.

Plus, only coverage you've purchased for yourself extends to the rental car.

Even if everything goes smoothly, and all your coverage transfers perfectly, you are still at a risk of large unexpected charges from the rental car company. 

The problem all comes from if you wreck the rental car.  If your insurance covers the damage (from your personal auto insurance policy collision coverage), it still isn’t enough to cover all the fees from the rental car company.

There are two particular fees the rental company will hit you with if you wreck their car – Loss of Use and Loss of Trade in Value.

Loss of Use is exactly what it sounds like.  This fee includes lost money from the rental car company not being able to rent the car while it is being fixed.  Even if the car may not have been rented each day, the fees will likely charge as if the vehicle was rented daily.  Put simply, you pay for the lost income from the car being in the shop instead of on the parking lot to rent.

While it sounds a little strange, this is a common coverage for insurance.  If you have a homeowners policy, you have loss of use coverage for your home.

The other fee is Loss of Trade in Value.  Rental car companies often have new, shiny looking cars.  This is because they commonly trade vehicles back in for newer models, so their cars don’t have too many miles and are overall more reliable and more pleasant to drive. Once a vehicle has been in a wreck, its trade in value is drastically diminished.  No one wants a car with an accident history.  So the fees for loss of trade in value would include the difference in what they could get for the vehicle.  This fee could be thousands of dollars.

So, should you buy the rental company insurance at the rental counter or not?

Well, a standard auto insurance policy does not cover loss of use or loss of trade in value for a rental vehicle.

However, some companies do offer optional, extra coverages that can be added to your policy.  Often there is a small package that includes multiple extra coverages that you can add on for a yearly fee. Rental car coverage is sometimes one of these coverages, and covers loss of use and loss of trade in value.

So the answer to whether you should buy the rental company insurance is, it depends.  If you have the extra coverage already on your auto policy, you wouldn’t have to.  If you do not have that coverage, or if you’re not sure and unable to confirm, be safe and buy the rental insurance.

If you’re uncertain if you have the coverage, or would like us to quote adding it to your policy, give us a call here at Killingbeck Insurance.  We’ll be more than happy to take a look at it.

When it comes to knowing if you’re covered driving a rental car, the best way to know what is and is not covered is always to read your car insurance policy.  It may seem long and daunting, but the information is invaluable.  It’s also a great way to make sure nothing is missed, and you are covered when a claim happens.

From all of us here at Killingbeck Insurance, we wish you safe travel all of the time.


Photo Credit: Modified “Dodge Charger” originally by Johan Viirok. Flickr. CCPL 2.0

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