Rental Car Insurance: Do I Need It?

WHITEBOARD WEDNESDAY (MAY 31, 2017): If you have ever rented a car, you know the feeling you get when the rental agent puts the full-court press on you about why you should purchase their rental insurance. In this week’s Whiteboard Wednesday, Matt tackles how rental car insurance works and whether you need it when you rent a car…


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Video Transcription

Hi everybody, Matt Quinlan here. Welcome to this week’s edition of #WhiteboardWednesday where we talk about real life issues that our clients face and we answer questions that we get from people that call our office. This week, we’re gonna be talking about rental car insurance and if you need it when you rent a car. We’ve all been there before: you find yourself coming in off of a flight, you’re at the rental car company’s, you know, building off-site, and there’s a big line and you finally get to the front and the rental agent’s pushing paper in front of you. She’s done it a million times… You know, there’s things for you to initial and sign and all this information kind of coming and going.

And the agent begins to make you feel like you need this insurance because you don’t understand your coverage and you might not be covered for all these things. And you start feeling insecure, and oftentimes you fall for it, and statistics show that 30% of the time people do, in fact, buy this rental car insurance. And the fact of the matter is, is most of it is totally redundant. You’re covered anyway, you do not need it, you’re not gonna be able to really benefit from it after you purchase it, but you’re gonna spend an arm and a leg doing it. So I created this “Whiteboard Wednesday” about the rental car insurance because I wanted people to feel a little bit more confident about what they’re doing when they’re renting a car, whether or not they need this stuff and have them better understand kind of what it is they’re being offered.

Loss Damage Waiver Insurance

So, let’s get into it. Rental insurance, you know, is offered with four types, basically. The first one is loss damage waiver and this covers you for crashes to vehicles, theft of the vehicle that you’re renting and vandalism to the vehicle that you’re renting. You’re right to think that your own insurance will cover you for this. Your personal auto, it certainly will. So long as you both have collision and comprehensive coverage. Collision covers the damage to the vehicles in a crash and comprehensive covers the other ways that your vehicle could be harmed at a fire, a theft, vandalism, a tree falls on it, and that type of thing. So if you do, in fact, have collision and comprehensive, your own personal or auto policy will cover you for what they’re offering you for about $20 a day. It’s not cheap. You know, if you go away for a long weekend, you can spend, you know, almost $100 just getting the loss damage waiver that you probably don’t need.

You know, the only kind of downside to using your own policy is that there’s a deductible, 500 or 1,000 bucks is pretty typical. So you know, you should weigh that, you know, when you’re making the decision about whether or not you wanna purchase it. And then loss of use is another issue I wanna raise because loss of use is the amount of money that the rental company loses by not being able to put that particular vehicle out on the road. So if it’s being repaired because you’ve damaged it, they’re gonna be losing profit and they will charge you for that and you’ll be responsible for it. Most good personal auto policies will cover you for that, but it’s something to check into because you can run, you know, a thousand dollar tab pretty quick on a car that rents for 50 or 60 bucks a day. So, you might wanna look into that. Obviously, with the rental damage waiver, this is included.

Liability Insurance

The other type of insurance that is typically offered is liability insurance. Now, liability insurance is required by California law, so you either have to produce proof that you have your own personal liability coverage or you have to buy this. Okay? So this one is pretty much a no-brainer. If you have your own personal policy, obviously, you’re gonna have liability. I don’t really think you need to go purchase theirs. I mean their coverage is a million bucks, which is, you know…that’s a pretty big policy, But you know, if you’re so into having a million dollars, you should probably raise your own rates, your own coverage limits rather, of your insurance policy and not be buying theirs. This typically runs about $10 a day. So you know, also not very cheap when you, you know, multiply it by the number of days that you rent.

Liability insurance, of course, covers damages that you do to other people, to their vehicles, to injuries that you might cause. I’m a personal injury lawyer. I represent folks that are harmed by people that, in fact, have liability coverage because, you know, they’ve ran a light, or you know, were texting and driving, or something like that, and they cause injuries. And so this type of thing will cover you for that, which is, you know, obviously a positive. One thing I do wanna draw attention to here is that both of these things…if you’re planning on using your own personal auto policy, it won’t cover you if you’re doing business.

So when you’re traveling, you rent a car, if you’re there for business, your own personal auto policy probably won’t cover you. You might not know that and it may be too late once you realize it. They’ll deny your claim because you’re doing business, all right? And so be really mindful of what the purpose of your trip is and if it’s business related, assume that the insurance company’s gonna find out and definitely either buy all this insurance and expense it or write it off to your business, or you know, speak to somebody at your work and make sure that you’re covered by the business’s company auto policy. This is a really easy trap to fall into. If you’re traveling for personal reasons, great, no problem, but if you’re traveling for business reasons, keep this in mind.

Personal Accident Insurance

The third type of insurance that’s offered by rental companies is personal accident insurance. Basically, this is insurance that pays for your medical bills if you’re involved in an accident and you’re injured. It covers your passengers as well. It’s really kind of like health insurance. So if you have health insurance, you might be thinking to yourself, “Why do I need to buy this? You know, I already have somebody that’s gonna pay my medical bills,” and you’re probably right. So if you have decent health insurance, probably don’t need this. Another really smart angle is through the med pay provision of your own auto policy. Most people’s auto insurance has about $5,000, sometimes as much as $25,000, and your own auto insurance company will pay for your medical bills, no questions asked, faults not important, if you present them with the bills. And so this is the way to get your medical bills covered.

Personal Effects Insurance

The fourth type of insurance that rental car companies offer is personal effects insurance. This basically protects your items: your computer, your cell phone, your camera, your GPS. And so, you know, if something get stolen, they’ll cover it. This one’s about five bucks a day, and I should mention that so does this personal accident insurance, it’s also about five bucks a day. So for five bucks a day, they’ll basically, you know, cover you if anything gets stolen. I mean, seems pretty unlikely your stuff’s gonna get stolen. You should probably consider what it is you’re traveling with. If you’ve got expensive computers and, you know, equipment or something, you might wanna get this. But otherwise, probably something you could pass on. For five bucks a day, you know, it does add up. The other thing is if you have homeowners or renters insurance, it’ll cover you for this type of thing. There’s a deductible, obviously, but if, you know, you rent a car, and you’re not traveling for a business reason, and somebody breaks into it and steals stuff, you’re own renters or homeowners insurance will cover you.

Credit Card Insurance

Now, another thing, another idea, that floats around there is, “Well, I have a credit card and I’ve heard that credit cards pay for rental insurance for…you know, they cover you for stuff like this, and that’s partially true. It’s important to note that it only covers you, though, if you actually use that particular card. So you know, just having an Amex card or a Visa card or something doesn’t mean that suddenly you have insurance. You actually have to use that card for this particular transaction and then they will cover you with some exceptions. First thing’s first, it’s a secondary coverage. So it’s not really, you know, a primary coverage that’s gonna protect you a lot. It just kinda fills in the holes. It stands behind anything you purchase from the rental car company. It stands behind your personal auto policy and will cover you, but only if it has to. So it’s not the type of thing that’s great, and you are gonna have to bring your own claim against your own personal auto insurance, which may raise your rates. So, this won’t protect you from that.

And there’s some limitations to it. Like I said, it’s not the best. It will cover you for collision and loss of use, which is good. It’s usually maxed out, though, at 25,000 to 50,000 bucks. So you know, so a decent amount of coverage, but there are some limits. And it’ll only cover you for short-term rentals. This credit card insurance, it won’t…if you rent a car for a month or two months, or you know, have a car, you know, while yours is being fixed or something, once you go over the 15 or 30 days, then it nullifies it. So long-term rentals are no good with credit card insurance. It does not cover you for liability, it does not cover you for any of your medical bills, and it doesn’t cover you for any of your property loss either. So you know, you’re gonna wanna look into, you know, the fine print of your credit card statement or call the company and ask them what your coverage is if you know you’re gonna be traveling. There’s lots of little exceptions, too, like you can’t have an expensive car. If you’ve got a sports car, no coverage. If you’ve got a nice, big SUV, no coverage. There’s a lot of different things like that, so you’re gonna want to kind of know what you’re doing if you’re gonna rely on this type of thing.

Travel Insurance

And then the last thing that sometimes people do is they buy the travel insurance. And if you’re buying flights online or something like that, you’ve probably seen travel insurance. And actually, travel insurance isn’t the worst idea if you’re kinda someone that doesn’t have a car, you’re uninsured, or something like that. It serves primary to, you know, primary to your personal auto policy, which is great. That means you don’t have to bring your own claim to your policy, so it won’t raise your rates. That’s a good thing. It only covers you for collision and loss of use, and it’s certainly much cheaper than buying it at the counter from the rental car company. So if you kind of think ahead, you can save some money, you get the same coverage.

So you know, this is kinda how it all works. You know, at the end of the day, I think my advice should be if you’re well insured, if you have a good auto policy and good health insurance, then you don’t need this stuff, all right. You know, all this money is gonna be put to waste and you could spend $40 a day, you know, buying insurance that you don’t need because somebody made you feel insecure when you were renting the car. Those people, by the way, make a commission when you buy the insurance from them. So it’s a sales thing and it’s probably really a waste of your money, and if you’re well insured then I definitely recommend you don’t buy any of this stuff. Be confident. Say, “No, thanks,” you know you’re covered. And if you don’t have an auto policy and you’re kind of, you know, relatively uninsured because you don’t have a car and maybe you don’t have, you know, a lot of assets, what I recommend is, obviously, if you rent a car, you need the liability coverage. It will cover you for a million bucks, that’s great, and then make sure you use a credit card and it will cover you for the collision and loss.

So you know, you’re gonna have to buy this for $10 a day and then you have the credit card, which you don’t have to pay anything extra for that will cover you for all the damages that you do. So that’s kinda my recommendation about how to approach it. You know, if you’re gonna be traveling with really expensive items, consider the personal effects. If you’re not, if it’s just, you know, normal travel with normal stuff, pass on this. If you have health insurance, I recommend you pass on this. You know, that will at least leave you not wasting your money. So, that’s it. You know, those are the issues that you’re gonna face at the rental counter. If you have any questions about this, I’m happy to answer them. If you have any questions at all about anything related to personal injury matters, I’m also happy to answer those questions. I appreciate you watching. I hope you learned something and I will see you next week on “Whiteboard Wednesday.”