Before you rent a car, know your insurance coverage

03-07-2004

 

Several weeks ago, I had occasion to rent a car at the airport in Ottawa. I had booked the car through Travelocity and was quoted a rate of $26.85 Canadian per day for a weekend rental, which seemed like a reasonable price.

When checking the car out at the airport, I was, as always, offered a standard package of daily insurance coverage options on the vehicle, its contents and occupants.

Normally I decline this extra coverage when renting cars in the United States, believing that I am already covered under both my personal automobile and company policies. But because I wasn't entirely sure whether those coverages also apply outside the country, I agreed to buy the package that was offered, without asking how much it cost.

Three days later, when I returned the vehicle, I was expecting a bill in the range of $100. I was shocked when the charges added up to $213.83.

It turned out that the insurance package added $25.95 per day to my cost. Silly me for not realizing that the daily insurance coverage could be nearly as expensive as the daily rental rates.

On top of that, various airport surcharges added $27.95 to the bill. Finally the whole package was subject to an 8 percent provincial tax and a 7 percent federal goods and services tax.

Those add-ons and taxes are standard with virtually all auto rentals these days, but all told, that insurance coverage had added $89.54 to the price of my three-day rental.

What's worse, as I determined when I got home, that additional expenditure for insurance was totally unnecessary -- at least in this case.

In fact, I was triply protected.

I was covered by both my personal automobile insurance and Post-Gazette policies.

Although the specifics vary somewhat among auto insurance companies, the general rule of thumb is simple.

Drivers covered by comprehensive automobile policies (collision and liability) on their personal or business vehicles generally have the same protections, both of damage to the vehicle and liability limits, when they rent a car for up to three weeks from an auto rental company in the United States, its territories and Canada. And there's no limit to the number of times a car can be rented in a given year.

On the other hand, these policies generally provide no protection at all for vehicles that are rented and driven anywhere else in the world, which means you should definitely pay for the extra coverage.

Of course, there are qualifications and limitations that drivers can unwittingly violate. Chances are your policy won't automatically apply if you're renting a truck, van, RV, SUV or motorcycle. Driving off-road or on unimproved roads may nullify the coverage, as will driving dangerously or while intoxicated. Coverage also may depend on whether you're using the car for business or pleasure.

Several states and Canadian provinces require drivers to carry higher liability limits and to be able to prove it. To be safe for trips to Canada, ask your insurance company to provide a "Non-Resident Inter-Provincial Motor Vehicle Liability Insurance Card" and take it with you.

Remember that these are only general guidelines. If you travel and rent cars on a regular basis, it is imperative to call your insurance broker and get the specifics about your rental car coverage. Be sure to differentiate between the insurance that provides you with a rental vehicle if your own car is out of commission and the insurance that covers cars that you rent when away from home. Some policies will require you to add a rider covering rental vehicles.

Ask how many rental days the policy covers each year. Make sure of your liability limits. Find out whether the insurance pays for only the deductible or the vehicle's full replacement.

If you only carry liability coverage on your own car, you might think about buying extra collision coverage on the rental car.

Or maybe not. Drivers who don't own their own car or have collision coverage under an existing policy can still get some protection when they use a credit card to pay the rental bill.

The major credit card companies provide automatic collision damage waiver (CDW) or loss damage waiver (LDW) coverage, which protects the renter against damage or theft to vehicles that are charged on their cards. In fact, this week Visa announced that it is extending this coverage to all of its cards. MasterCard and American Express provide similar protection with many but not all of their cards.

But there are caveats to this protection.

First, the coverage applies only to the vehicle itself and offers no protection for liability, personal injury or other property damage.

There also are limits to the type and value of the vehicle being rented, where and how long it's being rented and the amount of coverage. Coverage also depends on the type of card you have and the bank that issued it.

In general, Visa will cover damage to the vehicle due to collision or theft up to its replacement cost, but only for rentals of 15 consecutive days or less in the United States or 31 days outside the country. To claim a loss, the report must be filed within 20 days of the incident. Visa's coverage applies throughout the United States and most foreign countries, with the exceptions of Israel, Jamaica and Ireland, both north and south.

MasterCard adds Australia and New Zealand to the list of excluded countries and puts a limit of $50,000 on the coverage, which, considering the price of vehicles these days, may not be that much. The policy specifically excludes expensive, exotic and antique automobiles, certain vans, trucks, motorcycles, and RVs.

If they qualify for the credit card insurance, renters must pay for the transaction with the card and decline the collision damage coverage offered by the rental car company.

Note that this protection is provided only for credit card transactions. There is no coverage if you pay for the car with a debit card.

Although this CDW coverage is a definite benefit, it is not an absolute safety blanket. Credit card industry experts estimate that 25 percent of auto damage claims against their cards are rejected for one reason or another, often leaving the customer holding a sizable bill.

Still, despite what the auto rental agents say, there's no need to buy unnecessary and sometimes exorbitantly expensive coverage. Consider that the policy I bought for $25.95 a day worked out to more than $9,471 on an annual basis.

You can and should save money on rental insurance whenever possible, but it's important both to understand your coverage and to know your limits before assuming an extraordinary risk.

Remember: the cost of replacing a car, no matter how expensive it may be, is a limited risk. The potential for liability and personal injury exposure are not.

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