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To Buy or Not To Buy Rental Car Insurance

By Erik Folgate

You all know the awkardness of renting a car, and the sales rep will ask you if you want to buy rental car insurance. Their most popular pitch is that the worst could happen and you are stuck with buying them a new car. You try to remember if your auto insurance policy covers you for collision and/or liability in rental cars, but you can’t remember. Hell, you’ve never even read your auto insurance policy, let alone knowing whether it covers you for rental cars. Also, it’s not like they offer this coverage for an extra $5.00 per day. It’s about $25 to $30 a day, which can really increase your total rental bill.

Check out this article from USA Today about when you should and should not buy rental car insurance.

Personally, I never buy it. I think it’s a major rip-off, and it’s definitely a fact that these rental companies make major profits off selling the policy. That is why their sales people are so crazy about trying to sell you the policy. They’ll guilt or scare you into it, before you finally just break down and buy it. The fact is that most policies will cover you for rental cars. But, you need to do your research and make sure you know all of the conditions and exclusions in your policy. Some policies might exclude coverage in a foreign country, or it might only pay up to a certain amount for rental cars. If you don’t carry collision insurance on your own car, you might not be covered for property damage to rental cars. If your policy doesn’t cover rental cars, then you can usually add it onto your policy for literally $10 to $20 every six months. This is still a much better deal than buying the insurance from the rental car company.

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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  • Victoria Frailey

    My auto insurance will cover MOST of my exposure when renting a car, but I have not found any insurance that will cover “Loss of Use”, which means that if the car is involved in an accident and it takes several days or weeks to repair it, the rental car company can hold me liable for their lost revenue. That is too much risk for me, so I always purchase the rental car companies insurance. Am I too cautious? Can the rental car company truly hold me liable for that type of loss?

  • author

    That sounds pretty shady to me. I’ll try to ask a friend of mine who is an auto adjuster if they are entitled to collect loss of use from you. Rental companies have thousands of cars, I don’t think one of them in the shop is taking away from their business. But, it wouldn’t surprise me.

  • pal

    You never need it till you need it. The math is very simple. Suppose there is a 5% chance you get into an accident, with the average accident costing you $2000 inclusive of all the hassle,the expected worth of the insurance is 0.05*2000 = $100.
    For a moment consider the risk of getting in an accident and not having insurance. The tangible costs are
    a. the interest on your credit card as the claim is processed – the rental company will max out your credit card, and then wait to adjust the claim. Which might well be over 4 weeks. Think about the interest and the wasted time.
    b. the loss of use charge (which is not covered by the card/personal insurance),
    c. administrative charges (which too are not covered).

    By not buying insurance, you are putting yourself at the mercy of dumb luck. As a student, I always think what would happen if I rented a vehicle which was in a collision (regardless of fault). Think about say, a broken fender on a camry…cost $3000. when you return to the counter to return the vehicle, the agent is going to look at you funny, and ask you to write down everything that happened. The next business day you will receive a call from the rental company saying they are charging you $ 5000 to fix the problem inclusive of all charges. The bill will be mailed to you in a weeks time. You are now going to have a long winded conversation with your card company/insurance agent. After 4 weeks you have payed $30 interest on the $5000 charge (@ 10% APR). In the fifth week you credit card company will settle with the rental company for a negotiated price of $3500 leaving you to pay $1500.

    Consider the alternative. You walk in with the damage to your vehicle, the agent looks at you funny, you say..”woops” I am sorry, I have full insurance, here is the contract, thanks..have a nice day. And, yeah, here are the keys, the tank is full..good bye.
    Why put yourself in a position which might get you in bad debt. Yes it is not fair that the rental costs $35 and the insurance costs $60. It is just the way it is. Yes, For a weekly rental the cost balloons to twice the size. But the risk multiples 7 times over. Consider the point, you are driving in a new city probably, the roads are not familiar to you. The chances of even a minor incident are significant. Why not pay the extra $300, and enjoy your travel in peace.
    I have seen similar things happen to friends, one was charged for a scratch…yeah..an arm and a leg.

  • http://www.insuringnashville.com/ Tyler

    You should always check with your auto policy as well as any credit cards you may have. Chances are good that you are covered by one of these, but if you are ot it is a very good idea to purchase the coverage from the rental company.

  • http://www.insuringnashville.com/ Tyler

    You should always check with your auto policy as well as any credit cards you may have. Chances are good that you are covered by one of these, but if you are ot it is a very good idea to purchase the coverage from the rental company.

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