Insuring a rental car
Question: My husband and I are flying to the East Coast for a vacation. What do we need to know about insurance on a rental car? – M.K.Answer:As far as your exposure to financial risk is concerned, renting a car is the same as if you had bought an extra car. Your liability, both to the rental company and to third parties, does not change.
Your rental fee will automatically include liability coverage – you should confirm this, of course, and determine the exact amount of the coverage. But unless you request additional coverage, all other risks are on your shoulders. You could also take extra life insurance from the rental agency, but it tends to be quite expensive.
You should have coverage through your existing auto insurance policy (check it out), which will protect you against injuries you might cause to others (public liability), and other property that you might damage with the rental car (property damage), so make sure you are carrying enough liability coverage. Your existing auto insurance may also provide accident benefits if you are injured. However, it doesn’t cover damage to the rental car itself, so that’s why you need addional insurance.
Enter the rental industry’s solution: “collision damage waiver” insurance. This additional coverage will cost approximately $10 to $15 a day. While better than nothing, it is expensive coverage that can still leave you exposed by virtue of many potential exclusions.
You can avoid most of these shortcomings and reduce your total cost, however, by asking your present insurer to add a “27 endorsement” (also referred to as “rental vehicle insurance”) to your existing auto policy. This might cost about $25 a year, so it pays for itself quickly when renting a car, considering the daily cost of the collision damage waiver coverage. It might even offer you broader coverage.
The “27 endorsement” provides you with coverage for damage to non-owned automobiles, like a rental car, in Canada and the U.S. Note that the rental agreement must be in the name of the insured person named on the auto policy. If you are going to be driving internationally, make sure to ask your insurance or travel agent about coverage for both you and your spouse.
If there is a potential downside to the “27 endorsement”, it is that an at-fault accident with the rental car will count against your driving record, since your insurer would pay the claim. Using the rental agency’s insurance, however, you can simply get the car replaced and carry on without a lot of fuss and bother.
Some premium credit cards offer collision damage waiver coverage if you pay for the car rental using that card. Using this coverage may be a false economy, though.
Firstly, make certain that you are well informed as to the details of the coverage, and that your information is current. Is it still offered? Any time limits on the coverage? Who is covered under the insurance? If it only covers the cardholder, not your spouse or other potential drivers, you may be doing a lot of driving! Lastly, you’ll have to negotiate with the card issuer for any claims. While it begins to look like not such a good deal, at least get full details so you can make an informed decision. As is always the case, an uninformed decision can be too costly to imagine. So, plan ahead, be informed, and travel with peace of mind. – G.P.N.