Traveling for the Holidays? If so, the last thing on your mind is insurance. However, if your plans include renting a vehicle, you might face insurance exposure that you're not prepared for, or even worse, not covered for. Let us take the worry away by exploring risk management and rental car exposure.
When renting a vehicle, you are liable for injuries and property damage you cause to others, and all damage to the rented vehicle. Every rental contract I have ever looked at makes the renter absolutely liable regardless of fault. There are four main sources of liability when renting a car. These sources include: (1)direct liability for injuries or property damage that you cause, (2)direct liability for damages to the rental car that you cause by your negligent driving, (3)direct liability for damage to the rental car that you did not cause (Ex. Stolen, vandalized), and (4)direct liability for any loss-of-use/diminished value that the vehicle suffers due to the damages you caused.
A common belief that people have is that if they had an accident while driving a rental car, they would be covered by their personal auto policy or their credit cards. While this may be true, there are some gaps and limitations that you should be aware of. Let’s see how a personal auto policy would fair against the four main sources of liability.
All personal auto policies(PAPs) vary a little, so it's best to check with your insurer prior to renting but here's the norm: (1)You are usually covered up to your liability limits for injuries and property damage that you cause as a driver. (2)For damage to the rental car, you are covered only if you have full coverage on at least one of your vehicles on the PAP, subject to the deductible. No coverage otherwise. (3)You have contractually agreed to be responsible for all damages, even those you did not cause. Again, you are covered only if you have full coverage on at least one of your vehicles on the policy. (4)The most significant flaw in a PAP is the limited or lack of coverage for loss-of-use and loss of value. Loss-of-use is a fee imposed by the rental car company on the customer to cover its lost income while the vehicle is out of commission. Diminished value is the economic loss in a vehicle's value as a result of having been damaged. Be sure to ask your agent about these exposures.
So what about that new, super shiny credit card that promised you insurance coverage on rentals cars? Like PAPs, coverage from credit cards vary by card and are full of holes and limitations. I wouldn't rely on credit card coverage unless it guarantees to provides primary coverage, and it has no exclusions that could hurt you.
Whether it's credit cards, renting cars or insurance, there are contracts involved that are full of stipulations. It is wise to fully read these contracts and be aware of any exclusions or limitations. We recommend purchasing the optional collision-damage waiver from the rental agency for extra peace-of-mind. Feel free to contact me for more information and examples of costly claims.
*** Most PAPs limit their coverage to the United State, Mexico and Canada. I will have another blog in the future on risk management while traveling abroad however I recommend speaking with your insurance provider prior to traveling.