When you rent a car, you do so knowing that you are responsible for any damages that happen to it while in your care. Before signing the rental agreement, you will be given the opportunity to purchase rental car insurance that protects you against financial responsibility for vehicle damages.
If you have a credit card company or personal auto insurance policy that extends coverage for rental vehicle damages, you might be tempted to forego the extra coverage. However, doing so could cost you big if you need to file a claim. Continue reading to learn why taking the rental car insurance could be the right choice next time you rent a vehicle.
Your Rental Car Company Determines the Value of the Rental Car
When you rent a car, you will sign a rental agreement that says you are ultimately responsible for damages to the vehicle. You can purchase a collision damage waiver to help protect you from a large bill, or you can rely on alternative sources of coverage, such as a personal auto policy or coverage from a credit card. What you may not know, however, is that the valuation of the vehicle and how much you will owe for it is not based upon its actual cash value, but rather the valuation given by the rental car company. If the rental company charges you more for damages or loss than your personal insurance policy is willing to pay, you could be on the hook for any excess liability.
You Might Have to Float the Bill
Sometimes, rental car companies require immediate payment for the damages to a vehicle. It is possible that the company will charge the damages to the credit card you gave them to secure the vehicle. In this scenario, you might be stuck carrying a high balance and paying interest until your personal insurance company or another source of coverage reimburses the rental car company for the loss. If you had purchased the collision damage waiver, the rental car company would not pursue you for damages to a covered loss.
You Might be Responsible for Other Losses
If you cause an accident in your borrowed vehicle, the rental car company can hold you responsible for more than just the cost of damages. You might also receive a bill for other expenses like towing, administrative fees, and loss of rental income while the vehicle is being repaired or replaced. Most collision damage waivers will protect you against these types of fees, whereas your personal auto insurance or credit card coverage might not.
Traditional Insurance Requires Shared Financial Responsibility
If you have collision and comprehensive coverage on your personal auto insurance, it will probably extend to cover damages to a rental vehicle. However, these types of coverage only pay benefits that exceed your deductible. That means you could be forced to pay hundreds of dollars towards the cost of repairing or replacing the rental car.
A Claim Could Affect Your Personal Coverage
If you hit a deer on a dark highway in the middle of the night and no other property is damaged other than the rental vehicle, you might be better served by filing a claim on a collision damage waiver rather than your personal auto policy. The collision damage waiver would cover all of the liability in this scenario, whereas filing on your personal policy would create a new claim for your insurance record. This could affect the price you pay for car insurance, as well as your ability to obtain insurance in the future. It could also disqualify you from a valuable claims-free discount. Of course, your independent insurance agent can answer any questions you may have about rental car insurance, your personal coverage, and more.