Am I covered to rent a car?

Ever gone to rent a car and had the sales person adamantly suggest that you purchase the insurance from the rental car company? This usually feels like an unnecessary "up-sell" by the rental car company. However, there is a very good reason for their persistence and it isn't just to line their pockets. I'll try to describe some of the advantages and disadvantages of relying on your auto insurance contract and limitations that may be present.

First and foremost, you should read your contract. Do not rely on the fact that the well-meaning, anonymous person at the call center told you it was covered. What is written in the contract is what you have for coverage, regardless of what someone tells you over the phone.

I'm going to describe the coverages that are provided in a standard auto insurance contract. Again, there is nothing really standard about this and each company may have altered the wording significantly so please, read your specific policy and do not rely on this article. (You can also call or email us if you would like us to review your auto insurance contract for free.)

There are two aspects that should be handled separately: Liability coverage and physical damage coverage. They are handled differently under the contract and you should know the distinctions. First, with liability coverage - that part which keeps you from losing everything you own if you crash and hurt somebody - the definition and specific language usually promise to protect you from claims for bodily injury and property damage that arise out of "any auto accident." These words are very specific and in this case designed to be fairly broad with respect to your protection from liability judgments against you from other motorists.

There are some exclusions that may apply to your auto insurance coverage. Generally, the class of operations is limited to private passenger autos. This means that if you rent a motorhome, a moving truck over 10,000 lbs, a motorcycle, or any vehicle that isn't a private passenger auto, you may not have any coverage under your auto insurance policy. Also, if you are renting a vehicle for business purposes, your personal auto policy is likely going to exclude coverage.

Physical damage coverage is handled quite differently. Most contracts use the term "Your Covered Auto" to describe what type of vehicle gets the benefit of your insurance policy's physical damage coverage. The definition of "Your Covered Auto" usually is limited to the following four classes of vehicles: 1) Vehicles listed on the policy 2) a "Newly Acquired Auto" 3) any owned trailer 4) a temporary substitute vehicle.

The last class is an important distinction. On the standard car insurance contract, a temporary substitute vehicle must be Non-owned, temporary, and used because your primary vehicle is out of service due to a) breakdown b) repair c) servicing d) loss e) destruction.

To spell it out in plain English: if your primary vehicle is in the shop, destroyed, stolen, etc. and you are renting a vehicle temporarily, the damage to your rental car will be paid for by your primary auto policy. However, if you are on vacation and choosing to rent a vehicle just for pleasure, the physical damage to that rental car is likely NOT going to be covered. Again, some companies will offer endorsements and include this feature, but as a rule, that is the way the contracts are written.

Now that we are a little more clear on what is and isn't covered in the car insurance contract, there is a very specific advantage to purchasing the physical damage waiver from the rental car company - it saves you time and may not be reported to your company. If you buy their physical damage coverage and damage the rental car, you can turn in the keys and let the company deal with fixing it. In addition to saving you time and inconvenience, the rental car companies have in the past added additional charges, such as lost of rental income, restocking fees, etc. which can add up in addition to the cost of the damage to the vehicle. Additionally, if there is no injury involved you may very well avoid having the accident in a rental car show up on your driving record, which will save you an average of $600 on your future auto insurance premiums after an accident.

When renting a car, please be sure to check your policy - ask your agent or broker to point out specifically in the contract where the coverages apply and how they are treated. If they can't point that our or are unwilling to show you, find an agent or broker that will take the time to help you.