Summer is here! Warm weather has arrived, school is out, and many families are planning their summer vacations. One question that may pop in to mind when renting a car for your vacation is: “What type of coverage extends from my Personal Auto Policy to my Rental Car?” This week’s blog will address the popular question; “Do I really need to purchase rental car insurance?”
First, let’s take a look at what type of coverage extends to a rental vehicle from your Personal Auto Policy. Typically, the coverage you have on your vehicles on your Personal Auto Policy will extend to the rental vehicle. Meaning if you have liability only on your vehicles, only liability coverage will extend to the rental vehicle. If you have liability and physical damage coverage, both liability and physical damage should extend to the rental car. With this being said it is imperative that you read your policy language in both your rental agreement and your insurance policy to ensure physical damage will extend.
Many people do not realize that there isn’t just liability and physical damage to be concerned about. Rental car companies can charge you for “Diminished Value” of the vehicle if involved in a loss, and also charge you for “Loss of Use” of the vehicle.
The difference between what your car was worth pre-crash and post-crash is called “diminished value.” For example: You rent a vehicle that is estimated at $15,000 in value. You are driving the rental vehicle, and a deer jumps in front of you causing $3,000 in damages. It is now estimated the value is valued at $12,000 after damages are repaired. The rental car company can charge you the $3,000 in loss of diminished value.
They can also charge you for Loss of Use. Loss of Use is the loss of rental income on the damaged car. An example we’ll use is; The vehicle is rented out for $40 per day. The vehicle is then involved in an accident. It is in the repair shop for 6 days before the vehicle is fixed and able to be rented out again. The rental car company can charge you the 6 days at $40 per day for “loss of use”, totaling $240.00.
Always check with your insurance provider if Liability, Physical Damage, Diminished Value, and Loss of Use will extend from your Personal Auto Policy.
Another factor to remember if you don’t purchase rental car insurance is the deductible you will have to pay from your Personal Auto Policy. Not only will you have to pay the comprehensive or collision deductible from your Personal Auto Policy, but you may notice a significant premium increase at renewal time due to the loss payout.
With this being said, it is always a good idea, and strongly recommended, to purchase insurance directly through the rental car company. In doing so you can be rest assured that all of the loss exposures will be covered, and that there will be no surprises coming your way.