The right rental car insurance can save you from a financial
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
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
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."
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
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
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
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
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
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.
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
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
"Your insurance is a lot more important."
Dana Dratch is a freelance writer based
-- Posted: Sept. 23, 2003