You may not realize that the additional coverage may be your saving grace in the event of a serious incident. To learn why you may need to purchase additional coverage, it is crucial to understand what the typical coverages encompass.
Damage Waiver (DW) or Collision Damage Waiver (CDW)
Often abbreviated DW, or CDW, this protects you against paying for damage to the rental car itself. If you hit a tree or perhaps a wall, the damage waiver will alleviate your responsibility for repairs to the vehicle. Typically, damage waiver runs around $8.99 or so per day and will take the place of your own collision coverage.
Personal Accident Insurance (PAI)
This coverage can go by varying names and may not be offered in all states. PAI, or personal accident insurance, covers medical treatment for you and any occupants of the rental vehicle in the event of an accident. PAI usually has a limit similar to regular med pay coverage found under your own policy, but it is your responsibility to verify the specifics on the rental car contract. This coverage is often inexpensive, around $3.99 a day.
Supplemental Liability Protection (SLP)
This is additional liability coverage and one of the most important ones. This option is most commonly overlooked, which can be a costly mistake. This protection will handle claims for any injuries or physical damages to others if the incident is determined to be your fault. SLP, or supplemental liability coverage, usually runs around $8.99 a day (depending on location) and provides liability coverage, often up to one million dollars.
Why Purchase Additional Coverage
Many people reject the additional insurance because they think their credit card covers everything, or their own insurance will handle it. Unfortunately, many credit cards deny coverage and personal insurance companies often deny coverage for accidents that occur in rental cars as well. Keep these points in mind when determining whether additional rental car coverage is right for you:
Credit Card Protection: 99% of the credit card coverage that people allude to only covers the damage to the rental car itself, like the damage waiver coverage. The credit card protection does not cover any third party damage, like property damage or bodily injury. You would have to then make a liability claim on your policy to investigate the 3rd party damages. Be sure to double check with your credit card company before you travel as it may not cover some states, countries, or types of cars.Personal Insurance: It is important to check with your auto insurance carrier as what coverage is available while driving a rental car, or other non-owned auto. You might be surprised to learn your own insurance will typically not cover you in a non-owned auto. In most cases, the insurance “follows the vehicle”. That means the insurance company will be looking to the rental car agency to provide any coverage. For drivers with assigned risk policies, there may not be any coverage when driving any vehicle not specifically declared on your own policy. Another factor to consider is the reason behind renting a vehicle. Many companies have policy language that states they will only provide coverage in a rental vehicle if your listed vehicle is inoperable, i.e., in the shop or broken down. When preparing your travel plans, call your personal auto carrier to determine the answers to all these questions.
Personal Insurance Deductibles: People often say the additional coverage offered is a waste of money when you have your own coverage; however, stop and think about your deductible amount. With the current state of the economy, people are trying to cut monthly expenses and auto insurance is one area they make cuts by lowering coverage amounts and raising their deductibles to reduce monthly premiums. A common example of a typical rental car customer may be someone with a $1000 deductible and rental coverage that totals $150 for the rental period. While it is essentially a gamble, think about where you are renting a vehicle and how familiar you are with the location and laws. Driving in unfamiliar locations, especially busy city highways, can raise your chances of getting into an accident. If an accident occurs, you would be responsible for your entire deductible, not to mention have an at-fault accident now on record with your carrier, which could raise your premiums the following policy term.
When deciding on rental car coverage, also factor in what your liability limits are. If you carry the state minimums of $15,000/$30,000 and cause an accident in another state with expensive medical treatment costs, your limits could easily be wiped out after only minor to moderate injuries to a family of four.
Typically, all rental car contracts contain indemnity clauses, which means the rental car company can come after you for any damages they had to pay out on your behalf. If they pay out $10,000 in injury and physical damage costs due to an accident you caused, they have the right to come after you for that $10,000.
So, the next time you are making travel plans that include renting a vehicle, contact your credit card company and personal insurance carrier to see what coverages are available. If you still have concerns, take the extra rental car coverages so you can enjoy your vacation with the peace of mind knowing you are covered in the unlikely event an accident does happen.