You are very excited to finally be on vacation. You stroll up to the car rental counter, when the friendly customer service rep asks you the dreaded question: "Do you want to buy the insurance?" This question can send even the experienced insurance professional into a tizzy about what to do next.
"Do I need to buy the car rental insurance" is one of the most frequently asked questions we get at HPM Insurance. Unfortunately whether you should buy the rental car insurance or not is not a straight forward answer, but hopefully with a little prior thought and planning you can feel confident about your decision either way.
The answer to “does my personal policy afford any coverage for a rental car,” is most likely. Whatever coverage you have on your NH car insurance policy will most likely follow you while you are driving a rental car, as long as you are in the US or Canada. Typically, if you have full coverage on at least one car on your own policy, the coverage will apply to the rental as well.
Whether you should purchase the insurance the rental company offers is entirely up to you. Here are a few reasons why:
- The rental company may hold you responsible for loss of income they incur while the vehicle is un-rentable. Your car insurance policy will most likely not cover these charges as your policy covers physical damage.
- Many rental agreements stipulate that if the vehicle is declared a total loss in an accident, you are responsible for the replacement cost of the vehicle. Your auto policy only pays actual cash value, which is replacement cost less depreciation. As all vehicles begin to depreciate as soon as it leaves the lot, this could be a costly situation for you.
- Many rental car companies won’t wait for a settlement to come through from your insurance company. If you are vacationing far from home, it may take some time for the adjuster to handle the loss. Instead of waiting for a settlement, the rental car company may decide to tack their damage expenses onto your credit card.
- Many rental companies will tack on “administrative” costs if an accident occurs. Again, your auto policy covers “physical damage” only. The cost of paperwork is not covered.
- If you are vacationing with friends or non-resident family members think about who will be driving the car. It does make a difference regarding who is actually renting the car and who is driving it. Your New Hampshire car insurance may not extend to a car you rent and your friend drives.
Even if you buy the rental car company’s insurance, read the fine print of the agreement. Many of the agreements state that the insurance will only apply while you (name on the rental agreement) are driving the car. What happens if a valet is parking the car, or if your teenager moves the car for you?
Given the holes in coverage listed above, it is always a good idea to read the contract and coverages available to you from the rental car company before you leave on vacation. Many car rental companies post such information on-line. Click here to see example coverage options from Hertz.
It is not uncommon for credit card companies to cover some of the gaps listed above- assuming you use the card to rent the vehicle. It is also advised that you also contact your credit card company to get the specifics on this before renting.
Some insurance companies also offer coverage enhancements to fill in some of the coverage holes while renting a car, but they are not all the same. Check your policy or call your agent to see how your specific policy will cover you while you rent a car. If you rent frequently, it may be worth-while to have a company that offers such coverage.
As you can see, the question of buying the rental car company’s insurance has to be answered by you, as it is not a cut and dry decision. If you decide not to, it is important that you understand the consequences. As there are so many insurance companies and rental car companies, we would strongly suggest that you both speak with your insurance professional and the rental car company in advance, that way you can sit back, relax and enjoy your vacation!
This material is for informational purposes only. All statements herein are subject to the provision, exclusions, and conditions of the applicable policy, state and federal laws. For an actual description of all coverages, terms and conditions, please refer to the applicable insurance policy or check with your insurance professional.