6 Reasons You Should Buy the Rental Car Insurance

By Emily Guy Birken on 13 July 2017 0 comments

Erika Plank Hagan knows all too well the value of buying rental car insurance. In July 2013, Hagan and her family drove from Connecticut to Ohio in a rental car to attend her brother's wedding. While they were on the road, Hagan's eldest son, who has special needs, got bored in the back seat and decided to wrap the middle shoulder harness belt around his neck — when it suddenly locked.

They happened to be driving through a construction zone at the time, meaning there was no place for them to pull over. Hagan's husband was driving, so she leapt into the back seat and wedged two fingers between the seat belt and her son's neck, and they drove that way until they were able to pull over. The belt would not unlock, and so the Hagans had to cut their son out of the shoulder harness. Thankfully, he was shaken, but unharmed.

This terrifying story has Hagan almost believing in premonitions, however. Her husband just happened to pack a pair of scissors, which he normally wouldn't do because he was so used to traveling by air. In addition, though the Hagans do not usually buy car rental insurance, they happened to agree to the rental insurance for this trip, meaning they did not have to pay for the cut shoulder harness.

This is the story that also got me to question my own belief that rental car insurance is an unnecessary add-on that car rental companies use to upsell their customers. While few drivers will experience a scenario like the one Hagan and her family went through, it is important to recognize that there are definitely good reasons to sign up for the rental car insurance.

1. You will have to pay your auto insurance deductible

Relying on your own personal insurance can be more costly than signing up for the rental car insurance because of your deductible. Depending on what you have set as your deductible, you might find yourself staring down a bill as high as $1,000 after an accident in a rental car. The daily cost of rental insurance will surely be less expensive than your deductible, and paying that cost can provide you with a great deal of peace of mind.

2. Your auto insurance does not cover "loss of use"

The majority of auto insurance policies will cover your rental car within the limits of your collision and comprehensive coverage. As long as you are prepared to pay your deductible in the event of an accident or other damage to the car, then it can seem as if your personal auto insurance should be enough.

Unfortunately, that assumption does not take into account all of the costs of damage to a rental car. In many states, automobile insurance does not cover what's known as "loss of use." When the rental car is in the shop for repairs, the company is losing the money it would earn from renting that car out. You will be on the hook for that cost if you are relying on your auto insurance to cover damage to a rental car.

3. Rental car insurance might protect you from auto insurance rate hikes

One major downside to relying on your personal auto insurance to cover a claim on a rental car is the fact that your insurance rates will probably go up afterward. However, using the rental car insurance you purchased from the company will not increase your auto insurance premiums in certain cases. According to Hannah Rounds, Consumer Finance Expert at Unplanned Finance, "If you hit a pole while insured by a rental car company, you'll probably escape rate hikes. If you hit another vehicle, you should expect to see your primary auto insurance rates increase."

Here's how it works: National rental car companies sell primary collision damage waivers, which means your rental vehicle is covered at 100 percent. If you purchase the rental car insurance and have an accident, the rental car company won't go after your personal insurance for money, and they normally don't report damage. As a result, your insurance claim remains outside of mainstream reporting, and your rates remain unchanged. However, if there are police involved in your accident, then the incident will be reported to your Motor Vehicle Record, which means you might see your premiums rise even if you don't make a claim with your insurance.

Finally, there are multiple types of rental car insurance. Supplemental liability insurance through the rental car agency covers any damage not already covered by your personal auto insurance, meaning that a claim will be made to your insurance and you will likely be seeing a rate hike as a result.

4. Insurance provided by your credit card may not cover enough

Travelers who have both a robust automobile insurance policy and a credit card that offers car rental coverage may believe that they are completely covered in case of a rental car mishap. Unfortunately, credit card coverage is not nearly as comprehensive as you might think. (See also: What Does Car Rental Insurance Really Cover On Your Credit Card?)

To start, some cardholders may not be aware that they need to use the specific card offering rental car insurance benefits when they rent the car. It's not enough to be a cardholder. You must use the card with rental insurance benefits to rent the car in your own name in order to access the benefits. You must also decline all optional coverage offered by the rental car company.

In addition, not every card offers these insurance benefits, so you need to know ahead of time if your card will protect you.

Credit card rental insurance also has some pretty specific limitations. For instance, some types of vehicles are excluded from credit card rental insurance coverage, including pickup trucks, some SUVs, and expensive and/or exotic vehicles. The traveler who dreams of exploring the city in a Porsche needs to remember this limitation.

Furthermore, many card policies won't cover administrative fees charged by the rental car company, and none will cover diminished value. Diminished value refers to the reduction in a rental car's resale value caused by an accident. If you get into a crash that is serious enough to lower the car's value but not serious enough to total it, you'll be on the hook for that diminished value if you are relying on your credit card for rental insurance coverage.

5. Business travelers may not be covered by personal auto insurance

My father used to fly to Arizona for an annual business conference, and then stay for a few extra days to enjoy the sunshine. That kind of business/pleasure trip can be a land mine for car renters. That's because while their company may cover the insurance for car rental during the business portion of the trip, their personal auto insurance will likely not cover them for the pleasure part of the trip. One workaround for this would be returning the car and then re-renting it once the trip ticks over from business to pleasure — but you might find that buying the rental car insurance from the start is an easier fix for this problem.

6. International travel is often excluded from personal auto insurance

If you are renting a car outside of the United States, you may or may not be able to count on your personal auto insurance and/or your credit card's rental insurance for coverage. Many auto insurers specifically limit their coverage to driving in the States, and credit cards specifically exclude several countries from their rental insurance benefits.

Better safe than sorry

By its nature, insurance is something you hope you never have to use. The cost of rental car insurance can make it seem like it's financially smarter to skip it and hope for the best. But if you ever do have a problem with a rental car, you'll be glad you bought the insurance and didn't rely on hope to keep you financially fit.

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6 Reasons You Should Buy the Rental Car Insurance

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