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Originally published Saturday, August 3, 2013 at 7:07 PM

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Everything you need to know about rental-car insurance

Check and double-check what your own insurance and credit card will cover — it may not be as good as you expect.

Airfarewatchdog.com

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Like atheist, I have found Enterprise to be all about hard-sell. I've rented from them... MORE
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I've rented many cars, thankfully mostly for business, so probably wouldn't be liable a... MORE

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Renting a car? Buying the over-the-counter insurance that rental car companies sell could be the dumbest move you’ve made all day. That is, unless it’s the smartest.

The question is, are you covered? Too many travelers have no idea, and it’s in that cone of uncertainty that the rental car companies are able to pounce and profit.

If you don’t know, for example, what liability coverage your own auto insurance policy provides, or whether your credit card is any use in times of rental car trouble, then why, the agent will be asking you, would you want to drive off the lot without peace of mind? Why indeed.

Trouble is, peace of mind doesn’t come cheap. Think hundreds of dollars added to your weekly rental costs, which are already skyrocketing, as competition goes all but extinct in the more-consolidated-than-ever rental car industry.

Here’s what you need to know about insurance:

Are you the owner of a car?

Yes? Great. Then you probably have an insurance policy. You’ll say this to the guy behind the counter. He’ll counter with: Do you know if your coverage is adequate? Are you going to be stuck with a huge deductible? They’ll throw it all at you. And if you can’t answer the questions confidently, suddenly you’ll be thinking maybe I should be buying the insurance here, because, really, what if something happens and I’m not covered?

Stop. Stop it right now. Before you leave home, examine your policy documents or call your insurance provider and ask questions like: Am I covered for damage, theft and loss of use? Liability for injury to others (personal and property) while in the rental car? Personal effects if stolen or damaged? How screwed am I, as regards deductibles and such, if I find myself in any trouble related to the above? You should know the answers to all of these questions.

Coverage through your credit card? Maybe. Probably not.

Too many people think that their auto insurance policy plus their credit card coverage benefits equals all set. Again — maybe you are, maybe you’re not.

Have you read the documents? Too many renters learn the hard way that what most credit cards provide is “secondary” coverage, meant only to bulk up your auto insurance policy, paying out after that has been exhausted. Your Visa card, for example, can be a great asset, but if you don’t follow all their rules, the very thing you think is going to keep you out of trouble might end up leaving you in a world of hurt.

Across the board, it’s wrong (really, really wrong) to assume that one size of coverage fits all card brands. Some higher-end MasterCards might be great. Other card levels may offer little protection. Examine each card document carefully. Finally, note that credit cards tend to mostly offer collision, damage and theft coverage, if they offer anything at all. Personal liability (hitting a pedestrian, crashing into a store front, or injuring drivers in another car) and personal effects are generally your problem. Again: Read.

So you’ve got nothing.

Say you go over both your auto insurance policy and your credit-card documents. Say you now fully accept that rental car-wise, you’re less than protected. Don’t just wing it — winging it can lead to all kinds of trouble, such as you being stuck with a bill for thousands of dollars or a huge jury award.

Besides upgrading your credit card to something more useful and bulking up on your auto insurance you can also sign up for primary coverage with a third party (but again, this will only be coverage for damage to the rental car, it’s not personal liability coverage).

What is this “primary coverage with a third party”?

It’s a separate policy that protects you when you rent cars. Maybe you are protected with your credit card and your auto insurance policy, but if you get into an accident and have primary coverage elsewhere, you can leave your insurer out of the loop entirely, avoiding any potential rate increases.

American Express cardholders can purchase a Premium Rental Car Protection policy for less than the cost of one day’s damage waiver in many destinations. For $24.95 per rental period of up to 42 days — $17.95 if you live in California — you’ve got $100,000 in coverage for damage and theft, plus $100,000 of Accidental Death or Dismemberment coverage, $15,000 for excess medical expenses and up to $5,000 for personal property loss. The real deal here? No deductible. Nada. It’s a good policy. Best of all, it kicks in automatically when you begin your rental using that card. When you do, you’ll be surprised at how easy it is to stop agents in their tracks — most know about the policy. Tell them you’ve got it and they’ll generally understand that they’re dealing with someone who has come prepared.

But what about liability?

As long as any accidents involve just you and, say, a lamppost, you’re now well and truly protected. Bump into a billionaire in a supermarket parking lot, however, and you may not be adequately protected, liability-wise. Many drivers lack the proper liability protection, often assuming that they’re safe, hiding behind their homeowners or renters policies. More than once, after hearing about all the coverage we’ve got, the rental car agent has asked the question, “What about liability?”

While rental car companies are required to build basic liability protection into their rates, they won’t tell you this. Generally, you’re going to be fine in a fender bender situation, but if you find yourself in some horrible scenario where you can be sued for lots of money, then make sure you are covered (if you’re a high net-worth individual, you probably have an umbrella liability policy, which should be enough, but check with your agent).

For those who are not covered, the agent will be happy to sell you Supplemental Liability Protection, often quite reasonably priced at about $10 per day. Then again, liability protection isn’t something you should be sorting out on the fly with some kid at the Enterprise counter — this is a matter for your insurance broker.

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About Travel Wise

Travel Wise is aimed at helping people travel smart, especially independent travelers seeking good value. The column covers everything from the best resources to how to tap into the local culture. It runs each Sunday in the Travel section.

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