ORLANDO, Fla. – It’s one of the most common dilemmas facing a traveler: “Do I pay extra for the rental car company’s insurance, or waive it and hope my own coverage is enough?”
If you’re asking yourself this question *at* the rental car counter – my friend, you haven’t done your homework and you’re about to take a test you didn’t study for.
Time for a lesson.
What Your Personal Car Insurance Covers
If you already own a vehicle and have coverage, your liability insurance – car insurance required by law – usually extends to rentals. That means damage or injuries you cause to others while driving is covered.
Class dismissed? Not quite.
Liability insurance alone, however, doesn’t cover the rental vehicle itself. It isn’t quite as bad as “You wreck it, you buy it,” but liability insurance is not designed to pay for damages to a rental vehicle in the case of a crash. For that, you need to rely on collision and comprehensive coverage from your personal car insurance policy.
This is the most common type of insurance a rental car company will try to sell you at the counter.
If you have a new car and you’re making payments, you probably have this built into your policy. Even after a car is paid off, most people keep collision and comprehensive insurance on their cars. However, some people with older vehicles have dropped collision and comprehensive as the cost sometimes exceeds the value of the vehicle. If you don’t carry those protections on your own car, you won’t have them on the rental either.
Mind the Gap
So, you’ve got your own liability insurance, you’ve got your own collision and comprehensive insurance, so you’re probably set, right?
Not right.
In the case of a crash where a vehicle is pulled out of the rental car fleet for repairs, the rental car company can hit you with a variety of charges:
- Loss of use fees: This is a charge the company can charge under the guise that their asset isn’t making money because it’s being repaired and they’re passing that loss on to you….
- Diminished value: The vehicle isn’t worth as much as it was before the crash- the rental car company is going to pass that loss on to you as well…
- Administrative fees: Mystery fees for all the paperwork. You caused the problem – you get to pick up this cost too…
How Some Credit Cards Can Help
Have you ever wondered why some people pay a yearly fee for a credit card while others are content to take a free one and save on the upfront costs?
Repeat after me: not all credit cards are the same.
Many premium travel credit cards like the Amex Platinum, Chase Sapphire, or Capital One Venture X, include bonus benefits not available to customers of lower tier or free credit cards. Among them: rental car insurance benefits (if you pay for the rental with the card).
Known as “auto rental collision damage waiver” (or something with similar wording), this added benefit for a premium or premium travel card offers:
- Coverage of physical damage to or theft of the rental vehicle…
- Loss of use fees (if the rental company can document them)...
- Some towing and some administrative charges…
And to come full circle, here’s what those premium cards don’t cover:
- Liability for injuries or property damage.
- Personal injury or loss of items inside the car.
- The risk of diminished value.
Every card has different terms and different coverage, so it’s critical to read the fine print. Better yet, call your card issuer before assuming you’re good to go.
New Tech: AI Damage Scanners
If things weren’t bad enough, some rental companies are now turning to technology to recoup costs for damage to their vehicles.
The first: Hertz. The rental giant has begun rolling out UVeye AI inspection at a number of major U.S. airports including Atlanta, Charlotte, Dallas, Houston, Newark, Phoenix and Tampa. The new AI scanners check for damage in seconds as the vehicle goes through a giant halo type of device before and after the rental. The system, created by an Israeli startup, photographs the car’s exterior, glass, tires, and undercarriage and flags any discrepancies.
Hertz plans to expand the technology to 100 airport locations by the end of 2025, and its planning on implementing the tech at its Thrifty and Dollar brands.
How do you protect yourself from technology flagging false damage: make sure you do a thorough walk-around of the vehicle before leaving the rental car lot and point out any major damage not documented on the rental agreement.
The Bottom Line
Before renting:
- Call your insurance company to understand how your policy applies to rentals…
- Check with your credit card provider to see if they cover damage waivers or loss-of-use fees…
- Protect yourself at pickup and return by photographing or taking video of the car from every angle…
And one last thing: if you’re renting for business instead of leisure, ignore everything you just read.
Business rentals aren’t usually covered under your personal car insurance or personal credit card. And as for international rentals, you’re probably on your own for those as well (but most Canadian car rentals are treated like domestic rentals – check with your insurance carrier and premium travel card make sure).
Ultimately, whether you buy rental car insurance depends on your existing coverage and your tolerance for financial risk. Spending a little more at the counter may provide peace of mind, but doing your homework beforehand can save you from surprise costs later.
Class dismissed.