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Despite the growth of the sharing economy and services like Uber and Lyft, there has been a recent increase in demand for rental cars. Most commonly, drivers are using rental cars for travel or as a replacement if their personal vehicle has been damaged or needs repairs.

Before purchasing a rental when on vacation or choosing a replacement while your car is in the shop, you may wonder what role your insurance policy plays in your usage of a rental car. Understanding your insurance policy can be helpful in preparing for the risks and costs that may be incurred during your rental car usage.

Using a Rental Car After an Accident

If your car is in the shop after an accident, you will have to check your insurance policy for Transportation Expense or Rental Reimbursement coverage. This coverage only applies if your loss was one that was covered by your insurance policy. Your Transportation Expense coverage will help pay for the cost of your rental car while your primary vehicle is being repaired.

How do you know if you have Transportation Expense coverage?

Automotive insurance is usually comprised of some combination of collision and comprehensive coverage. Collision coverage relates to any damage that is incurred to your vehicle by contact with objects, including other vehicles or structures. Comprehensive coverage pays for any damage that is a result of non-collision, which includes fires, break-ins, and glass breakage.

Whether you have Transportation Expense coverage depends on which kind of coverage you have. If you have both comprehensive and collision coverage, Transportation Expense coverage will help pay for your rental in situations of both comprehensive or collision-related loss. If you only have comprehensive insurance, you will have Transportation Expensive coverage for comprehensive-related damage and not collision-related damage.

How much will the Transportation Expense coverage pay?

Your amount of coverage will determine which rental car options are most affordable to you. Depending on what your priorities are, you may select a compact car for its affordability. However, an insurance company may not fully cover the cost of a compact rental. The most common coverage provides $20 a day for your rental. A compact car averages at $30 a day depending on the city you live in and the company you are renting from, among other factors.

If you need a larger vehicle to carry out your daily tasks, you may have a higher out-of-pocket expenses for your rental. Your insurance policy does not guarantee you a rental car class equivalent to your personal vehicle. For example, just because you drive an SUV does not mean an SUV rental will be fully covered for you.

How can I decrease my out-of-pocket costs for my rental car?

Talk to your insurance representative about adjusting your policy in order to decrease the out-of-pocket expenses or expand your rental car class selection.

Using a Rental on a Trip

If you’re traveling to a new spot for vacation, you may want to consider a rental car as a convenient mode of transportation for your travels. Before going through with a rental, there are some questions you may want to think through.

Does my insurance cover me while driving a rental on vacation?

The answer to this question depends on two factors: where you are going on vacation and what type of coverage you have.  Most insurance policies typically apply to rentals within the United States, U.S. territories, Puerto Rico, and Canada. Most likely, you will also need collision insurance on a minimum of one vehicle on your insurance policy.

If you are in an eligible territory and also have collision insurance, both collision and comprehensive insurance may be extended to your rental, subject to your deductible. If you have various deductibles on your policy, usually the lowest deductible will apply. Be sure to check with your insurance provider to understand the details of your insurance policy.

Should I sign the insurance waiver at the rental counter?

Before rejecting the Collision Damage Waiver (CDW) at the rental car counter, you may want to consider a few things.

If your insurance policy does not include collision coverage, it is strongly recommended that you purchase the collision damage waiver. Without collision damage coverage, you could end up having to purchase the rental company a brand new car.

Even if you do have collision coverage, you still may want to consider purchasing the waiver. In the event where you damage the rental car, the rental company could make you pay for the damages upon returning the vehicle. If this payment could be difficult for you to pay, purchasing the collision damage waiver could make sense for you. Ask the rental company agent for more details on the costs involved if the car was damaged.

Should I consider suspending my collision insurance?

If you are going to be away on your trip for over 30 days, it might make sense to suspend your collision insurance for a month or more since you won’t be driving your car. The comprehensive coverage would cover the damages that take place while you’re gone, such as a break-in.

However, if you are considering getting a rental car during your vacation, it would make sense to keep your collision coverage for the duration, so that any damages to the rental car would be covered under your policy.
Posted 12:13 PM

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