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The right rental car insurance can save you from a financial wreck

 Do your vacation plans include renting a car? If so, your insurance agent, not your travel agent, needs to be first on the call list. And it's not too soon to start thinking about which credit card you want to use to pick up the tab.

That's because insurance firms, car rental agencies and credit card companies are all competing for your insurance dollar -- and what they offer today could be very different from what they will offer next week.

"It's a constant battle, a fight for advantage," says Gerry Goldsholle, the CEO and founder of FreeAdvice.com, a legal Web site for consumers. "It's like something out of Mad Magazine's Spy vs. Spy."

While everyone wants to be your friend now, that could change if you have an accident. "And you don't want to be caught unprepared," says Goldsholle.

Collision and liability
Ultimately, it's up to you to make sure you're covered. So plan ahead. If you have auto insurance, call your agent and find out what kind of coverage you have. Most auto policies extend to rental cars. Ask specifically about two things: collision damage waiver and liability. Collision damage waiver, or CDW, covers any damage to the car you are driving. Liability covers damage you do to someone else.

"These are the two areas where you don't want to make a mistake," says Jeanne Salvatore, the vice president of consumer affairs for the Insurance Information Institute, a nonprofit industry-sponsored organization. "These are the two areas that are costly."

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In addition, if you're worried about theft of your belongings, check your homeowners or contents insurance to make sure that what you're packing is protected.

Ask your insurance agent if there is a limit on your collision insurance. If you normally drive a 10-year-old Honda, but are planning to rent a brand new Lincoln Town Car, make sure that your policy will cover the complete cost of replacing the more expensive vehicle.

"If you're driving a Toyota worth $4,000 and you total a rental that's worth $15,000 -- you've just lost $11,000," says professor Rob Weagley, chairman of the consumer and family economics department at the University of Missouri-Columbia.

Some companies don't limit the collision insurance -- meaning you are fully covered no matter what you drive. Other policies set a limit or exclude certain vehicles, like luxury cars. Find out ahead of time what the rules are.

If you normally drive an old clunker and you've dropped your collision insurance -- or you don't have either a car or insurance -- you need to purchase a policy at the rental counter or use a credit card that will give you coverage. If you rent cars frequently, get estimates from your regular insurance agent on a policy to cover you -- it might be the cheaper alternative.

Credit card coverage
Some credit card companies will supplement your auto insurance when you rent a car. Diners Club, for example, provides unlimited collision insurance for a limited period. But the policy excludes exotic cars -- like Porsches and Lamborghinis -- and does not include liability coverage. Also, if you purchase additional collision insurance from the rental car company, you automatically invalidate your Diners Club coverage.

Shop carefully. Two people can carry the same credit card, issued from the same bank, but still be eligible for different rental benefits. In the case of American Express, even having the same level of card -- regular, blue, gold or Optima Platinum -- is no guarantee you have the same insurance privileges.

Call your credit card company and get the results in writing -- they can fax you the information if you're in a hurry. If you're not, call them twice. It's not unheard of to get two different answers to the same question from the same company.

"There's an 800-number on the back of the credit card," says Salvatore. "Call and ask specifically how much coverage do you have and for what."

When you talk to your credit card representative, ask about collision and liability. Then find out if there are any exclusions. Besides excluding certain types of cars, some companies will refuse to cover you if you're driving outside the U.S. Others will cover you, but only for a limited time.

Many credit companies will not allow you to use their collision insurance if you purchase any from the rental car company. But because some cards do not include liability coverage, they will allow you to purchase that. Merely having "insurance" isn't enough -- find out what kind and how much.

Over-the-counter insurance
Think you might be interested in over-the-counter coverage from a rental car company? You guessed it -- you've got a couple more phone calls to make. When it comes to the coverage they offer, all car rental companies are not created equal. For $10 to $25 per day, on average, some companies will offer collision, liability, contents and life insurance -- while others just provide collision. Even collision coverage differs. Some firms cover anything on the car. Others exclude a few of the basics, like tires, wheels and glass -- bad news if you get a flat or crack a windshield.

If you purchase over-the-counter rental insurance, ask about those dreaded exclusions. Usually, you won't be covered at all if your accident is the result of outrageous behavior on your part, according to Salvatore. So if you crunch a fender going the wrong way down a one-way street in a strange city, you could be on your own. Thinking of having a few margaritas while you're out on the town? Take a cab -- it's cheaper in the long run.

Want to do some wandering in your rental car --either across state borders or into Canada or Mexico? Find out ahead of time if the company's insurance will still cover you.

Avoiding a rate hike?
Some vacationers pick up the rental insurance believing that if they have an accident, they'll be protected from a rate increase from their regular insurance company. Wrong.

If you have an accident in a rental car and you're at fault -- your home insurance company can raise your rates no matter who picks up the tab, according to Michael Sullivan, a spokesman for State Farm Insurance.

Thinking of not reporting that rental car fender bender to the company back home? Bad idea. Instead, you should call your insurance company as soon as you get back to your hotel. If the worst happens and your credit card or rental car company doesn't pay -- and you haven't reported the accident to your insurance company -- you could end up paying the damages out of your own pocket.

The family trip
What about letting teens drive a rental car? Can you hand over the car keys without risking your financial future? That depends on whose insurance you're using. If you rely on your regular everyday auto insurance to cover your rental car, chances are that anyone living in your house is covered. If you think you may want your teen to do some of the vacation driving, broach the subject with your agent before you leave home.

If you are relying on credit card or over-the-counter insurance from a car company, your teen might not be covered. Ask the company involved who is allowed to drive, and get the answer in writing. In addition, some rental companies have policies about young drivers -- they may not allow them at all or may charge extra to add them to the rental contract. Find out before you get to the rental counter.

"It's better to ask the questions before you go on your holiday," says Weagley. "People are usually more concerned with whether their swimsuits fit.

"Your insurance is a lot more important."

Dana Dratch is a freelance writer based in Atlanta.

-- Posted: Sept. 23, 2003

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