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Coverage for a Rental Car

Posted on by McClone

Posted By: Joe McClone, Personal Risk Advisor

Whether or not you should purchase the coverage offered by rental car agencies is a complicated question and unfortunately, it does not have a simple answer. The rates for this coverage vary greatly and depend on factors such as the car you’re renting, who’s renting it to you, the country, and the deductible per loss. While we are not able to explain how your specific rental contract (and/or credit card contract) will operate, the following is some general information based upon contracts we have seen in the past.

When you rent a car, one coverage option is for damage to the vehicle. This is called Loss Damage Waiver (LDW) or Collision Damage Waiver (CDW). Your personal or business auto policy may provide some coverage for the rental car, but the LDW is broader than most of those policies.

There are five primary reasons you should consider buying the LDW:

1. No Deductible – When your auto policy pays for the damage to the rental car, you will pay the policy deductible. There is usually no deductible with the LDW.
2. No Claim on your Record – When your policy pays, the claim will show in insurance industry databases and can influence your rates in the future. LDW claims are usually not reported to the insurance industry.
3. Full Coverage for Loss of Use – If you damage the rental car, you will also be responsible for the loss of rental income while it is out of use. Many auto policies do not cover this, and others provide only partial coverage. This is usually not an issue if you purchase the LDW.
4. Coverage Matches Your Legal Obligation – With a collision loss, your auto policy should pay the cost of repairing the vehicle if you have full coverage. The rental agreement you signed may require much more than that. Most rental car companies now charge for Diminished Value (the reduced value of the vehicle because it has been in an accident). One major rental car company is simply selling the damaged vehicle at auction and charging the renter for the difference between the pre-loss value and the sale proceeds. If what your auto policy pays does not cover the bill from the rental car company, you will pay the difference. When you buy the LDW, your obligation for the damage is covered completely.
5. You Won’t Miss the Plane – If you return the rental car damaged, you may miss your flight home as you complete paperwork. When you have the LDW, the return process for a damaged vehicle is much simpler.

LDW coverage is expensive, around $20 per day in most cases. Many renters feel the peace of mind is well worth the expense.

In general, here are a few things to remember:

1. In almost all cases you should purchase the Loss Damage Waiver (LDW) or Collision Damage Waiver (CDW),
2. In some cases you should buy the Liability (for example, it may be a good idea if you have low limits on your coverage or are out of the country),
3. You may not need the personal effects coverage as this may be covered under your Homeowners policy,
4. Read the contract, and
5. Don’t violate the contract (e.g. use of alcohol or medicines, unauthorized drivers, driving on unpaved roads, etc).

Rather than trying to save costs by skimping on coverage, we have put together some other tips to save on rental car expenses:

1. Consider a compact car. These are usually among the least expensive cars on the rental lot, so agencies often run out of them first – which may allow you to be upgraded to a size one to two times larger. (If there is a compact car ready to go but you do want a larger vehicle, you can usually pay an upgrade fee on the spot.)
2. Rent at an off-airport location.
3. Understand the real rate you are paying. Local taxes, airport surcharges, and fees – for an additional driver or drop-off, for example – can almost double the base rate. Ask how much these charges will be when you book.
4. Choose your rental car company based on price, not on loyalty program memberships, especially if you rent infrequently. Loyalty programs are designed primarily to streamline the pick-up process (skip the check-in counter, head straight to your car), and may not give you a lower rate.
5. Don’t accept the pre-paid gas option. If you do, any gas left in the tank is money in the agency’s pocket.
6. Find out when the agency closes. If the agency is closed when you try to return the vehicle, you might incur another day’s worth of charges.
7. Do online research and look for coupons and discounts. These may be offered at the rental car company site or other coupon or travel websites.
8. Consider reserving the car for longer than you need it. This may sound counterintuitive, but tacking an extra day onto that weekly rental or even adding a couple of hours to extend it over a weekend — with no intention of returning the car that late — can actually lower your rate. The strategy takes advantage of lower prices aimed at leisure travelers who are more likely to travel on weekends. You are essentially tricking the system into thinking you’re booking a two-day weekend rental, which typically has a lower base rate.
9. Negotiate. Even after you have booked the best rate, it can be worth stopping by the rental counter to see if you can negotiate a better car.
10. Prepay. Sometimes rental car companies are willing to offer discounts of up to 20 percent for travelers that are willing to prepay.
11. Set your price. If you do not mind the car you drive or the company you rent from, you can receive significant discounts by setting your price through sites such as www.priceline.com or www.hotwire.com.

If you have any other questions or concerns, please contact:

Joe McClone
920-725-3232 Ext. 3424
joe.mcclone@mcclone.com

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