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by Scotty Mack

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"Should I purchase the car rental company's insurance?" This question is the source of more misinformation and bad advice in the print media and on the television, radio and Internet than any other car rental topic I know of. The number of times that I have read or heard from "experts" that the car rental companies' insurance is a "waste of money" or a "rip off" only reconfirms my uneasiness regarding information reported in the media.

Let me set the record straight. Assuming that you are fully insured for damages to a rental vehicle and for third party liability through your personal vehicle insurance company, the answer to this question is "maybe" and like all insurance matters, is a bit of a gamble on your part.

Even if you are fully insured, are you prepared to immediately pay the deductible on your policy if you are involved in an accident? This is frequently required by car rental companies and could put a strain on your vacation funds. Furthermore, after you have damaged one of their cars, they may very well refuse to provide you with another vehicle!

Are you prepared for the inevitable price increase in the premium charged by your insurance company if you are involved in an accident in a rental car for which you have not taken the rental car company's damage waiver as you drive an unfamiliar car in an unfamiliar town?

When the accident occurred, were you in violation of any of the terms of the rental agreement (you know, that document the car rental company gave you with all the microscopic writing on it when you rented the car)? Your insurance company is hoping the answer to this is "yes" so that they won't have to pay a dime, leaving you to foot the entire bill yourself.

Are you prepared to pay for Loss of Use of the rental vehicle? "Loss of what?" you may ask. "Loss of use," also known as "down time," is a part of virtually every company's rental agreement and it states that you are personally responsible for paying for loss of use of the rental vehicle for every day that it is unable to be rented due to an accident, regardless of fault. "Huh?" you say, "My insurance company or credit card company doesn't cover that?" Nope! Somewhere, hidden deep within the legal document issued by every insurance company I have had the pleasure to have known, is a statement saying that they will not pay for loss of use of a rental vehicle. That means that you are personally liable for paying for the rental car at the daily rate for every day that it is out of commission. In this case, you better hope that your insurance company comes to a quick resolution of the matter (especially if another vehicle is involved) or you could be paying for your rental car for days, weeks or more after an accident!

Rental car companies are also permitted to charge "administrative fees" that typically range from $75 to $150 for the processing of damage claims with your insurance company. Some insurance companies cover these administrative fees. Others, require their customers to pay for it.

So, should you take the car rental company's insurance? The answer depends on more than one factor such as the number of days that you are renting a car, your financial situation and whether you are prepared to roll the dice, so to speak. The simple answer is, if it's a relatively short rental, most definitely! The longer the rental is, the less reward there is versus the risk but; because of Loss of Use, there will always be an element of risk.
There are a few more things that must be stated in order to present the most accurate information possible on this controversial subject:

The term "insurance" is a misnomer, but I have used it on this page because that is what the large majority of misinformed media call the protection offered by rental car companies. Rental car companies offer "Damage Waivers," which wave the responsibility of customers for paying for damage to the rental vehicles, in accordance with the rules set forth in their agreements. The liability coverage and personal accident and effects coverage that they offer are actual insurance, however.

An unknown provision of the "Transportation Bill," passed by both houses of Congress and signed by the President of the United States in July of 2005, states that car rental companies are no longer vicariously liable for damages caused to third parties by customers who rent vehicles from them. The customer is now, therefore, responsible for indemnifying any parties that they cause injury to. If you only have the minimum amount of liability on your personal auto insurance, you could be putting yourself at risk for a lawsuit that you could be paying for the rest of your life if you elect not to accept supplemental liability insurance from a car rental company.

When you sign a rental agreement, you sign a statement that you, personally are responsible for any damages to their rental car, no matter how they occurred or who may have been at fault. The rental car company is in no way obligated to work with your insurance company, any other insurance company or any other party for that matter. The fact that they usually do, is a courtesy that they extend to their customers. Legally speaking, they can demand immediate payment for damages up to and including total loss of the rental vehicle from any and all signers of the rental agreement.

I spent may years as a manager in the car rental industry. Furthermore, my wife has been in the car rental industry, working for companies large and small for more than twenty years. In our thirty combined years of experience, we have never heard of anyone who was involved in an accident while driving a rental car, that did not take the car rental company's coverage the next time that they rented a car.

Learn more about this author, Scotty Mack.

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