CR104: Car Rental Insurance Basics
If you had an accident recently and are now looking on the Internet for “what to do”, click this link here. If you had an accident and have already returned the car and are wondering “what’s next?”, click here.
Let’s start with the basics. When you go to the counter to rent a car, you are given many options. Some of you may have been wondering “is all of this necessary?” The answer is a resounding “no.” Insurance is not a required purchase in pretty much every state in the nation except Texas (more on this later). However, there are caveats.
First let’s explain what Insurance on car rentals are. There are four things that a car rental agency will try and get you to purchase in this category.
1> Damage to the rental car. For most large rental agencies, the type of coverage is Loss Damage Waiver (LDW). This coverage only covers the rental car itself for damages caused by the renter, regardless of whom or what the rental car hit. In other words, if a rental car hit a tree, the car damage would be taken care of. If the car hit another car, the damage to the rental car would be covered, but the damage to the other car would not. That is liability coverage and will be covered later.
Some of the smaller agencies will actually sell loss damage insurance (LDI) to cover the rental car. This is the same coverage as a LDW, but the fees are paid out to an outside company.
When it comes to LDW vs. LAI, LDW is a better way to go. A Loss damage waiver is just like your best friend saying “it’s okay, don’t worry about it” after you totaled his car. The damage, even total loss, is simply “forgiven.” This is mainly done because many of the car rental agencies are “self-insurers” on their cars. They put their own money into their account each month as an insurance cost line item and pay itself out of that fund for losses.
There are two forms of Loss Damage Waiver, full and partial LDW. Full Waiver in some fashion is available anywhere in the Nation. Partial damage Waiver is just that, a specific dollar amount is covered and no more.
2> Covering other people and property. A second type of coverage offered is the Additional Liability insurance (ALI) or Supplemental Liability Insurance, known as LIS or SLI. These are actual insurance policies up to a specific dollar amount (often 1 Million dollars) that covers you and your authorized drivers for damages to other people’s property and person.
3> Personal Effects. The most inexpensive (and if you ask me indispensable type of insurance is the Personal Effects Protection (PEP) also called the Personal effects coverage (PEC). This insurance covers you and your party against loss due to theft, or accidental damage up to a specific dollar amount. This coverage often extends to the hotel room and anywhere you go during the length of your trip. Typically there is a deductible amount and everything after that amount is paid out as a cash payment until the policy cap is reached (usually less than $2,000) This insurance is usually less than 2 dollars a day.
4> Personal accident protection. This is also rather inexpensive. Usually less than five dollars a day will cover the driver and often the entire traveling party up to $100,000 of accident insurance while traveling in the car. As a bonus, the driver (renter name on the contract) is often covered 24 hours a day for the duration of the trip. This policy is a very good option if you dont have tavel insurance or personal medical insurance that covers you while on your trip. This is a “MUST CONSIDER” item for people from outside the U.S. or while traveling outside the U.S. if you do not have personal travel insurance.
In our next lesson, we will discuss which types of insurance you should consider and when.
*note this information is informational and the Internet sometimes doesn’t change as often as the laws. It is not meant to be legal advice and should not be accepted as such. When renting, double check with a qualified rental agent or insurance agent before relying on this information as a source of legal information.