auto Insurance Article

Does Your Personal Auto Insurance Cover Rental Cars?

Vacation time is at its peak and car rental agencies are busiest during the summer. Rental car agencies have had an influx of customers due to natural catastrophes that forced many auto owners into rentals.

Typically, consumers focus on the debate of whether or not to buy supplemental coverage from the rental agency. But renters should also be aware of what coverage they do have from personal auto insurance or credit cards.

Before you rent a car, you should know that relying on personal auto insurance or credit cards may not always be the answer and end up costing more than a lavish vacation.

Although the lengthy rental agreement requiring multiple signatures can seem more like a mortgage closing than a car rental exchange, renting a car is usually fairly simple, especially for car owners with good driving histories above the company’s required age. Compared to a few years ago, many companies will rent to drivers age 21 to 24, but not without surcharges averaging around $25 daily. Spending extra on surcharges isn’t a good enough reason to bypass extra auto coverage though.

Of course rental companies have this age requirement in place due to statistics showing younger drivers cause more accidents, but one accompanying advantage for renters is that by this age, renters usually use credit cards to gain extra protection, and hopefully have personal auto insurance. But regardless of protection credit cards, is that coverage enough or can you rely on personal auto insurance?

When renting a car, you’ll be asked if you want to purchase damage insurance for the rental. It costs anywhere from $10-$20 a day—which may seem pricey. If you’re not covered by credit cards or personal auto insurance though, this is much cheaper than the price of average two-car accidents–over $23K according to the Insurance Research Council. According to the American Automobile Association (AAA), the average cost per fatal accident is a whopping $6 million.

Will Personal Auto Insurance Provide Coverage?

Rental vehicles aren’t always covered under personal auto insurance, so read the fine print on your car insurance policy. Many full-coverage auto policies will transfer to rental vehicles if being used in place of your regular vehicle but there are exceptions as always.

State Farm, for example, is one insurer that will extend coverage to a policyholder’s rental vehicle. However, some companies’ policies have rental car exclusions entirely and will provide coverage only with higher deductibles or lower liability limits. The coverage many need most for rental insurance can be excluded–collision coverage and some will only provide comprehensive coverage.

If depending on personal auto insurance, check how damages are paid and when. Some insurers require you pay all costs upfront and then get reimbursed. These vary by state and insurer.

There are also times you should definitely consider supplemental coverage through a rental car agency or consider using a credit card — even if you have personal auto insurance:

• If you only have the state minimum liability limits on your personal auto policy
• If you carry liability only and not collision or comprehensive coverage
• If you don’t currently have an active personal auto policy
• If you only have a named non-owner policy
• If you’re already required to carry high-risk auto insurance and should keep claims or violations to a minimum

Consider this scenario too–even if you’re covered by personal auto insurance and are charged for even minor damage, it still may not be worth it to make a claim on your policy. You could be out the cost of the repairs if it’s under or close to your deductible, but you’d be placing a claim on your policy which could affect your premiums. This could be especially detrimental if you’re already considered a high risk driver or paying high premiums due to previous claims or violations.

Are You Covered by Credit Cards?

You may have coverage if you use a credit card to pay. Most major credit cards, like Visa, Discover, MasterCard, and American Express, have some form of car rental insurance. Some cards, like AmEx, will offer primary coverage for about $25 per rental, and will pay for damage before supplemental rental insurance or personal auto insurance even gets involved, meaning you don’t have to file claims.

According to a representative from Capital One, you may have to do the following for coverage through credit cards:

• Charge the entire purchase to the card
• Decline additional insurance through the rental agency
• At times, you can’t place the same claim with your personal auto insurance
• Credit cards will NOT cover any administrative costs, taxes, and any diminished value that you could be responsible for
• Your credit card may exclude coverage for vehicles like fifteen-passenger vans, luxury vehicles, or trucks.
• Some credit cards only offer secondary insurance. This means you have to make a claim with your insurer and then the credit card will reimburse the insurer, so you could still be looking at future higher premiums
• If you’re liable for damage, the credit card may not cover your replacement rental.

Aside from costs of repair, the rental agency could also charge for “loss of use,” which can be a significant cost associated with rental damage. No matter how badly damaged, you could be charged what agencies ‘lose’ from being unable to rent the car. Some credit cards exclude this, such as Discover. Some companies, like AmEx, Mastercard, and Visa require rental companies prove their fleet is over 80% rented while the car is being fixed.

Katherine Hutt, spokesperson for the Better Business Bureau (BBB) says renters should take extreme care when looking for existing damage and finding out about what you’re covered for.

“Take the time to inspect the car, and always ask questions. Make sure you know the options, like the add-ons, before you sign the dotted line.”

Follow Desiree on Twitter @DesireeBaughman.