Purchasing Car Rental Coverage

 What the rental contract offers  Issues to consider  Where to find coverage for rental cars Discussion Points

What the car rental contract offers What you typically get for your $24 to $43 a day purchase: Liability  Basic bodily injury & property damage limits required in the state the vehicle is rented is included in the agreement. However, limits are usually excess your personal/business auto policy.  You may opt to increase limits to a $1 Million at a cost of $12 to $15 per day. If this limit is purchased, it may or may not be primary. *Prices are an average and may vary.

What the car rental contract offers Physical Damage Full dollar protection at a cost of $12 to $28 a day for the rental, including: Loss of use Claim Expenses, Attorney’s fees and Administrative Expenses Towing and Labor Diminution in Value – Before and After (*) This is known as Collision Damage Waiver (CDW).

Issues to consider Prohibited Uses which will null or void the contract:  Unauthorized Drivers (Cost to add drivers is under $10 per day) Parking attendant may be considered an unauthorized driver  “Driving under the influence of intoxicants, drugs or other substances known to impair your driving ability.”  (This is a direct quote from a rental agreement)  Using the vehicle in an abusive or reckless manner, or if convicted of careless driving.  Driving on unpaved roads.  Leaving the keys in the car, and the car is stolen.  Going into prohibited areas (bordering states & countries)

Notable Items Contracts are not providing insurance. Therefore, they are not regulated and can exclude almost anything they want. It is a contract, therefore you are legally bound by it and held totally responsible.

Scenario 1 “BE CAREFUL NOT TO VIOLATE THE RENTAL CONTRACT” You purchased the CDW so you “think you don’t have to worry”. After spending $400 for the Collision Damage Waiver for your glorious 2 week vacation, you stop for lunch and have a complimentary glass of wine. On the way to return the car, you are rear ended by another driver. When asked if you had anything to drink, you answered “yes” to a glass of wine. The rental agreement has now been violated. Therefore, no CDW and you are now paying for the damages out of your own pocket or your auto policies (subject to deductible). Even though you paid for the coverage you can see that in violating the rental contract there are still gaps in coverage.

Where is the coverage for rental cars? There are several places to look for coverage:  The Car Rental Contract  Personal Auto Policy (PAP)  Business Auto Policy (BAP)  Personal and Commercial Umbrellas  Credit Card  Renters’ personal wallets, purses and money-clips

Where Can We Find Coverage? 1. The Rental Car Contract  This is the first in line because it is the easiest to use. Renter tells rental company “yes” and coverage is in place.  However: Its expensive. Easy for the renter to lose the coverage.  It’s important to be aware of the pitfalls involved. (Drinking & Driving, unpaved roads, unauthorized drivers, etc.)  The rental contract is one of the only ways to cover losses such as: Diminution in value – Before & After Loss of Use

Scenario 2 “SARAH AND THE DUMPSTER” Sara rents a vehicle valued at $28,000 and declines the CDW. Sara backs into a dumpster and causes serious damage to the vehicle. In the past the rental car company would repair the damaged vehicle. In this case, they collected $11,000 at auction rather than repair. PAP carrier, which included Physical Damage Coverage for the rental vehicle, correctly adjusted the claim on the basis of repair, $8,000. Sara received a demand for the remaining $9,000 which was charged to her credit card. Value of the car: $28,000 Auction price: ($11,000) Difference: $17,000 PAP paid: ($ 8,000) Due from Renter: $ 9,000 This is a practice implemented more and more by rental companies. The only way to cover this is to buy the rental coverage and not violate the contract.

Where Can We Find Coverage? 2. Personal Auto Policy (PAP)  This is your second line of defense, because this is where most insurance coverage is found for rental cars. Even if the rental is being used for business, the rental is almost always in the individual client’s name, the person who signs the contract.  In most States rental companies make their liability coverage excess of the renters’ PAP, even if you purchase higher limits it may not be primary over the PAP.  Physical damage is usually covered by the PAP policy.  Good News: Renter can have a glass of wine, drive on unpaved roads, etc., and still have coverage on his or her PAP.  Bad news: Loss of use and Diminution of value /Before and After of the rental car is not covered under PAP Physical Damage Coverage.

Where Can We Find Coverage? 3. Business Auto Policy (BAP)  A BAP can also provide hired liability coverage for rental cars. This is usually on an excess basis over the PAP.  To have the BAP respond to a physical damage claim, you must purchase Hired Physical Damage Coverage. Note: There is usually “Diminution in Value/Before and After exclusion” and “Limited Loss of Use Coverage”

Where Can We Find Coverage? 4. Personal and Commercial Umbrellas  Often excess of PAP or BAP limits on substantial rental car liability losses.  These policies may cover international liability losses that the PAP or BAP will not.

Where Can We Find Coverage? 5. Credit Cards  If you have a “Gold” or “Platinum” card it will usually cover rental car losses, but only if there is no other coverage.  You must charge the rental car on that card to activate its coverage.  Some cards will have a dollar limit and others will exclude high value vehicles and some will not pay for SUVs or off-road vehicles.  Credit Cards are not standardized, so expect differences.  Each card will have exclusions along with: “no coverage if you violate the rental car agreement”.

Where Can We Find Coverage? 6. Renters’ personal wallets, purses, and money clips  You may end up paying for losses yourself because the other possible solutions have gaps.

Conclusion  You should consider purchasing CDW.  Discuss liability options with your insurance representative to see if there is coverage elsewhere.  Be aware of the potential pitfalls that may violate the rental contracts.  Thoroughly read the car rental contract prior to signing.  Remember that all rental contracts are different and you are held legally bound.  Purchase hired physical damage on the BAP.