Rental Car Insurance

Many consumers opt not to take insurance offered under the car rental company contract when they rent the vehicle. These people don't think they need additional insurance coverage, because they are assuming they have coverage through their jobs, personal car insurance or by premium credit card benefits. This may or may not be the case. It's always best to read the fine print in your personal automobile insurance policy, renter’s insurance policy, and credit card rental vehicle benefits statement before waiving the coverage in your rental car contract.

This is especially true if you plan to drive you rental vehicle in a no-fault state. Some credit cards offer travel insurance, including car rental coverage. But Florida is a "no-fault" state. In a no-fault jurisdiction, it doesn't matter which driver causes an accident. Each driver is required to make a claim through his or her own insurance carrier, regardless of fault. In such a situation your credit card rental car insurance may not apply in Florida . In fact renting or driving a car in Florida may be specifically excluded in the fine print.

Some credit card companies will limit the type of vehicle they will cover. For example, the American Express Car Rental Loss and Damage Insurance will only provide coverage for a rental car in a “no-fault” state such as Florida as long as the car's value does not exceed $50,000.

The consumer should be aware that credit card rental insurance benefits applied in any state are usually considered “secondary” insurance and will only cover "excess" expenses not covered by other insurance plans such as personal auto policies. When other insurance plans are available, the credit card member must first file a claim for payment or reimbursement from the primary insurance coverage such as your personal auto insurance that might contain a comprehensive rental car policy.

The best way to answer questions you may have about car rental insurance is to contact your travel agent, credit card company, personal and auto insurance carrier. Insurance information is complicated. The consumer should ask questions and confirm that he or she has the proper coverage to protect them while driving a rental vehicle.

Most personal vehicle insurance policies will not cover a rental vehicle unless it is rented for the purpose of a “replacement” for a damaged or recently sold personal vehicle. Even if your insurance does cover such an accident, filing a rental car damage claim with your automobile insurance company may cause your yearly personal auto insurance premiums to increase severely. This is particularly true if you were at fault or driving in a no fault state.

Choosing the Right Coverage

Assuming the consumer opts to accept the insurance coverage offered in the rental car contract, he or she needs to know what type of insurance coverage is actually needed before accepting or declining insurance and waivers contained within the car rental contract.

If you do not understand a section or clause within the contract, ask the rental car company counter person if the following: Is collision and personal liability insurance included in the standard contract?; Is additional insurance available?; What are the financial limitations of the included or additionally purchased insurance?; What is the deductible on the insurance?; What out-of-pocket expenses will not be covered by the insurance if an accident occurs?; What are the steps necessary to submit a claim if an accident occurs?

Insurance Coverage Terms

LDW/CDW:

Insurance purchased from the rental company, is usually in the form of Loss Damage Waiver, (LDW), which is also referred to as Collision Damage Waiver coverage, (CDW). LDW coverage is very expensive and often only provides coverage the consumer has already maintained through a credit card program, personal automobile insurance policy, homeowners insurance policy, or renter’s home insurance policy.

Usually, LDW/CDW insurance contains many loopholes, excluding payment for bodily injuries or damage caused by intentional acts, driving recklessly, driving drunk or impaired, driving on unpaved roads, or driving out of the state in which the vehicle was rented. For that reason, not all states allow rental car companies to sell LDW/CDW coverage.

To represent LDW/CDW coverage as collision damage coverage is somewhat misleading. It is not the same as the full coverage or even the collision damage coverage on a personal automobile insurance policy. LDW/CDW is insurance guaranteeing the rental company will pay for all damages to their rented vehicle only! LDW/CDW will not pay for bodily injuries or damages to personal property. LDW/CDW does not cover damages to someone else's car, known as third party damages caused by the consumer. The consumer should check their personal or business automobile policy to how and when they are covered for third party damage when renting vehicles.

When sold LDW/CDW is usually listed on the rental contract as an optional charge of $10.00 to $15.00 per day. Rental car agents often refer to LDW/CDW as "collision damage" or “full” coverage and they usually encourage the consumer to purchase it at an additional cost. The consumer should be careful purchasing LDW/CDW coverage as it sometimes contains a deductible which makes the consumer liable for the first $1,000 or $2,000.

PAI:

In addition to LDW/CDW optional insurance, rental car companies may also offer

Personal Accident Insurance. (PAI) Personal Accident Insurance provides a one-time payment for you or a passenger in case an accident results in death or injury. The consumer should be advised that this type of coverage is generally provided for under his or her personal, auto or health insurance policies. When purchased, PAI usually cost around $2.00 to $4.00 per day depending on the rental location.

PEC:

Personal Effects Coverage (PEC) or Personal Effects Protection (PEP) pays if something such as your luggage, sunglasses and other personal effects is lost or stolen from the rented vehicle. This coverage may be well worth it to the average consumer as other personal policies, (homeowners, automobile insurance and credit card policies), may not cover such losses. PEC/PEP generally costs about $1.25 to $2.00 a day, depending on the location in which the vehicle was rented.

LIS:

LIS (Liability Insurance Supplement) is coverage that provides personal liability protection for damages that you cause to a third party. If in doubt, the consumer should purchase this coverage. Most states require that drivers renting vehicles have some form of third party protection, at least $15,000.00 payable to any one person, $30,000.00 payable to a group of persons.

SLI:

In addition to LIS, rental car companies may offer supplemental or additional liability coverage which pays over and above coverage contained in personal or business insurance liability limits. Once again, if you do not already have personal liability coverage for a rental car or your limits are low, you should consider purchasing this supplemental coverage.

UMP:

Uninsured (or under-insured) Motorist Protection, (UMP), covers you if the other person involved in an accident has insufficient coverage, (underinsured), or no insurance coverage, (uninsured). In the United States , particularly in states that do not require that all drivers have insurance, UMP can be invaluable.