To take the rental car insurance or not, that is the question. You assume the risk and responsibility when you drive someone else’s car. So what is the best way to protect yourself against it? Should you rely on your personal auto insurance and the coverage offered by your credit card company, or should you splurge on the custom protection offered to you by the rental car company?
The coverage offered by rental car companies is not really insurance, but rather a collision damage waiver. While it can be expensive, it can also shield you from any financial responsibility for damages to the vehicle. Though the decision is yours, we are listing five reasons why purchasing the collision damage waiver could be the better choice.
1. Loss of Use
Damage to a rental car costs a rental company much more than the total of the repair bills. There are also administrative costs, towing fees, and most importantly, loss of use. When a vehicle is taken off the road for repairs, it can no longer generate revenue for the rental company. It is not uncommon for rental companies to pass that loss to the driver who is responsible for damages to the vehicle.
Your personal insurance or credit card coverage might not cover these extra assessments. However, many collision damage waivers include provisions that guarantee the borrower will not be responsible for any losses related to the damage of a rented vehicle.
2. Out Of Pocket Costs
Collision damage waivers typically exempt you from any shared financial responsibility if a vehicle you rent is damaged, lost, or destroyed due to a covered event. If you choose to file a claim with your personal insurance or an umbrella policy, however, you could be required to pay a deductible or a self-insured retention before the insurance company pays benefits.
3. Valuation Disputes
Car rental companies will not let you drive away without first signing a rental agreement. The fine print inside this agreement says that you will assume responsibility for financial loss of the vehicle if it is damaged, stolen, or destroyed in your care. However, the price you pay could be much more than the actual replacement value of the vehicle. A collision damage waiver assures that you are not responsible for the damages, regardless of the cost of the loss.
On the other hand, using third-party coverage such as your personal auto insurance or credit card company could create a problem if there is a dispute over the loss value. Ultimately, you could be on the hook for any loss claims by the rental car company that exceeds the coverage within your personal policy or other rental car coverage source.
4. Payment Requirements
Imagine returning your damaged rental car and assuring the company that your insurance or built-in credit card protection will take care of the bill. A few days later, you check your credit card statement to find that you have been charged directly for the costs of repairs and other losses. After contacting the rental car company, you are told that the money will be refunded to you once your insurance pays for the damages. Though you will eventually get your money back, you are responsible for interest on your maxed out credit card in the mean time. Had you purchased the rental car insurance offered by the car company, you might have been able to avoid the hassle of waiting for your claim to settle.
5. Protect Your Record
There are some scenarios in which a collision damage waiver cannot spare you from a claim on your personal insurance. This includes incidents in which you also have financial liability for bodily injuries or property damage after a crash. However, some instances – such as running into a ditch or hitting a wild animal on the road – might not incur any financial damages except to your rental vehicle. In these cases, having the collision damage waiver can allow you to maintain your claims-free record with your insurance company and prevent your rates from increasing.
As you can see, there are some good arguments to take the collision damage waiver offered by rental car companies.
If you ever have questions about your personal or commercial insurance, be sure to give us a call, we’d be glad to help.