Renting a car from daily rental companies such as Hertz or Avis is a murky endeavor at best. The daily rental contract varies widely from each rental firm; there is no industry standard rental contract. Furthermore, these contracts constantly change. It is impossible for us, as your insurance agent, to offer sound, professional insurance advice under such circumstances, but here is a general overview of the topic as we see it.
What the Rental Company has to Offer
CDW (Collision Damage Waiver), sometimes called LDW (Loss Damage Waiver), is optional but recommended since it protects you from being potentially liable to the car rental company for damage to the car, even if something happens to it which is not your fault. CDW/LDW is not an insurance policy but a waiver of your liability to the car rental company for damage to the car. The cost of CDW/LDW is typically $9-$18 per day for normal cars.
Check with your credit card company to see if they offer any benefit for your protection when renting a car.
Liability coverage provided by the rental car company will typically only provide the state mandated minimum limits – which is far less than what you need.
What Your Insurance has to Offer
Your Personal Auto Policy provides coverage for claims arising out of your negligence while driving a rented private passenger vehicle within the U.S., its territories and possessions, Puerto Rico, and Canada. It provides liability protection to the limits listed on your policy, as well as comprehensive and collision for the car you rent.
However, there are a few important things to consider:
Any claim submitted to your auto policy is subject to your policy deductible
Claims paid by your insurance company will increase your premium at renewal
While your auto policy should provide coverage for damage to the rented vehicle caused by you, it will not provide coverage for:
- Diminution’ of value of the rented vehicle. (A decrease in market value of the vehicle after repairs are made). Most rental companies will attempt to collect a fee from you for this ‘loss’.
- Full value’ of the vehicle. Many rental companies’ contracts obligate you to reimburse the rental company for the ‘full value,’ while your auto policy will only provide the lesser of the ‘actual cash value’ of the vehicle or the amount.
- Loss of rental income. You will most likely be responsible for the rental company’s loss of rental income from the damaged vehicle while it is unavailable for rental during its repair.
- Administrative expenses. The rental contract may make you liable for various ‘administrative’ or loss-related expenses such as towing, appraisal, claims adjustment, storage, etc.
The liability coverage your auto policy offers you against any damages or injuries you cause while operating a rented vehicle is very important. However, since rental companies find so many areas to tack on charges should you ever damage their vehicle, the Collision Damage Waiver/Loss Damage Waiver they offer, which protects you from any of these expenses, is a very valuable method of protecting yourself.Never forget that insurance is ‘peace of mind’ coverage – what is your peace of mind worth?
The CDW/LDW fees are outrageous, if not unconscionable. An $18 per day charge equals $6,570 per year for physical coverage on one car, whereas your policy premium for collision is only around $250 per year.
The choice is yours, but we advise you to purchase the CDW/LDW for short-term rentals. If nothing else, it will give you peace of mind while on your vacation or business trip, and can save you from a lot of inconvenience, lost time and money.
P.S. Car Rental Outside the United States
We occasionally receive calls from clients asking about trips to other countries. Some insurance policies offer “worldwide” coverage, but that’s a little misleading. Notwithstanding the wording in your insurance policy, it will only respond to litigation presented in the insurance company’s own jurisdiction, i.e., the United States.When driving any sort of vehicle rented, loaned, borrowed or provided by a corporation, always make certain that insurance on the vehicle in that country is in effect. Even though your policy extends protection to other countries, that country may refuse to accept your policy because they have nationalized insurance.For instance, Italy may insist that you buy your insurance from their government and no other be acceptable.