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Question: I am going to be renting a car when I go on vacation.  Should I buy the coverage the rental agency offers me or am I covered by my own auto insurance?

While it seems like this should be a simple "yes, buy the coverage" or "no, your policy provides coverage" it is much more complex than that. You are signing a legal agreement with the rental company.  Each company's contract is different (everyone reads the contract before signing it, right?) and can have very different responsibilities.  Some of the things to consider are:
  • How will the company value to car if it is damaged?  The rental contract may have values far different than the actual cash value standard that your policy provides.  Without the waiver you may be responsible for any difference between what your policy provides and what the contract you signed requires.
  • Will the rental company charge my card immediately for the damage?  Part of that agreement you are signing (you are reading the agreement, right?) may authorize the rental company to immediately charge your credit card for the damages.  A five or ten thousand dollar surprise to your credit card may spoil you vacation greatly.
  • Do you have physical damage coverage on your auto policy?  You will have at most the same coverage for the rental vehicle as you have on your auto policy.  If you carry only liability protection and not collision you will not get collision coverage for a rental vehicle.
  • Will you be charged for "indirect losses"?  Some rental agencies will require you to reimburse them for the loss of rental income while the vehicle is being repaired.  They may also charge you for the "diminution of value" between the what the vehicle was worth prior to the accident and what it is worth after the accident.  Most insurance policies do not provide for this situation.
  • Will the waiver kick in if the vehicle is driven by an unauthorized driver?  Typically the waiver only applies to a list of drivers authorized when you sign up for the coverage.  If you are traveling with a group of friends and one of them NOT listed as a driver takes a turn driving and is involved in an accident the waiver may not respond.
  • Does the waiver (of which you read the whole thing, right?) exclude "careless driving"?  What accident is NOT the result of some level of careless driving?  Who decides what is "careless driving"? Many waivers from rental companies also have strict limits to alcohol use.  If you have a glass of wine at dinner and then get in an accident they can deny coverage.
  • Does your credit card provide coverage for damage to rental cars?  A couple of calls to your credit card companies may save you a lot of headaches when renting a vehicle.
  • Are you renting a motor home of travel trailer?  Many policies only provide coverage for "private passenger vehicles".  You may not have coverage for a large motor home.  
The bottom line is that neither answer fully protects you when renting a vehicle.  There are far too many variables to provide absolute protection for every situation with one or the other.  Contact us to discuss your specific concerns when renting a vehicle.
All information is in general term.  Your specific policy language governs what is and is not covered by your policy.