Ultimate Guide to Car Rental Insurance (2019) 1

The Ultimate Guide to Car Rental Insurance (2019)

Car rental is a very popular among travellers. People like to go on road trips just like they see in the movies and recreate magical moments with friends and family. However, the experience may not turn out so well if you meet an accident and do not have any car rental insurance to cover for the damage.

Usually, rental car agencies include some insurance facility in their rental rates. But that may not be sufficient to cover for the whole damage. For example: Say you met an accident and there was a small dent on the car. Sure, you can cover it personally or the rental agency may cover for it. But they may demand compensation fee for the time they lost business due to the car being in the workshop. To avoid such unpleasant situation, it is better to know your options so that your trips don’t turn into a horror show.

The 4 Types of Car Rental Insurance

You will find 4 types of car rental insurance coverage to pay for your damage. Each of these insurances have unique characteristics, so you have to know what you need to decide what type of car rental insurance best suits you.

Collision Damage Waiver (CDW)

CDW is the most commonly purchased insurance as it covers for any damage to your car – whether it is stolen, vandalized or crashed in an accident. However, the extent of its coverage is only the car’s bodywork, so if the car suffers any damage concerning its windows or engine, CDW will not cover for it. However, some CDW offers Loss of Use Charges. This will help you to pay the rental car agencies if they demand compensation fee for the income lost while the car was in repair shop.

Personal Accident Insurance (PAI)

While CDW helps to cover for your damaged car, personal accident insurance (PAI) pays for
your injuries. Car accidents can be quite fatal with need for emergency medical attention. If you have PAI insurance, it will cover for your medical cost as well as your passengers.

Third-Party Liability

This insurance is as important as CDW because when you meet an accident, it’s not only you or your car that gets hurt. Another person, or his possession may be damaged in the process. Hence, third party liability is critical to cover expenses for damage done to other vehicles or properties while driving the car. It also covers for medical expenses of any third person who got injured in the accident.

Personal Effects Coverage (EPC)

When you travel by car, you may venture areas which are not so safe. You may have locked the car before going for a quick snack, only to come back and find out that your car was unlocked and your personal items inside the car were all gone. Such losses of personal effects are covered by EPC to compensate the financial value of your lost items.

The first 3 car rental insurance are very important to protect you and your car (ie CDW, PAI and third party liability). The fourth one (EPC) is optional, considering the location you travel and how much the belongings in your car are worth to you.


6 Ways to Get Car Rental Insurance

While knowing the type of car rental insurance is important, it is equally important to know the best ways to purchase it. In this section, you can explore the different ways you can buy car rental insurance to fulfil your needs.

1. Personal Auto Insurance

Most Personal Auto Insurance Comprehensive package covers rental cars if you are driving the car for pleasure or personal use. So, double check with your insurance agent before buying an excess coverage.

Besides, even if your personal auto insurance does not cover for rented cars, it may have available riders which you can buy at a small fee than spending so much on a separate insurance policy.

Personal Auto Insurance Benefits:

  • You will not have to buy any car rental insurance. Your personal auto comprehensive package * will suffice your needs
    You will have your insurance company to fight for you if the rental car agency charges you for something you don’t agree

Personal Auto Insurance Drawbacks:

  • If there is any damage, you will have to pay first and later claim the insurance company for reimbursement
  • You may not be insured for excess) and security deposit paid to the car rental agency

2. Car Rental Agency

All car rental agencies offer insurance packages for rented cars. When you are booking the car, you can buy the insurance at the same time. you can buy it separately from the rental counter when you come to collect the car. Their insurance is designed mostly as a waiver – that is the company will waive the right to make you pay for any damage if you meet an accident.

Car Rental Agency Benefits:

  • The car rental agency acts as your insurer if your car is damaged. You would not have to spend out of your pocket. All the claim payments will be handled by them.
  • The money from the damage will be deducted from your security deposit or insurance excess, so you won’t have to pay extra money to cover the damage.

Car Rental Agency Drawbacks:

  • The flexibility offered by this insurance come at a price. It has the most expensive rate in the market compared to other buying options.
  • You will have to pay for any damage that the rental company charges from you, even if you don’t agree. You won’t have a separate insurance company to fight for those extra charges
  • Most commonly, this type of insurance is more like a waiver than a standard insurance. Hence, it is not regulated
  • It will deduct your security deposit and insurance excess up to zero, if needed to cover for your damages

3. Insure Online

You can buy the car rental insurance from any comparison site or a broker. Online booking will give you the flexibility to compare different rental agencies, diverse cars and different insurance rate to absorb the price at one go. You can even buy additional insurance for extra protection if you require.

Insuring Online Benefits:

  • You will get the insurance much cheaper than buying directly from the car rental agency
  • You can arrange your whole rental booking plus insurance at the comfort of your home, at your own time and according to your preference
  • If you choose to rent the car abroad, you won’t have to worry about language problems since you can make the claims when you get back home
  • You will have your insurance company to fight for you if the rental car agency charges you for something you don’t agree
  • Your excess and security deposit will be insured and won’t reduce the excess nor your deposit when you pick up the car

Insuring Online Drawbacks:

  • If there is any damage, you will have to pay first and later claim the insurance company for reimbursement
  • It is the second most expensive way to purchase car rental insurance

4. Third-Party Insurance

There are big online agencies such as Expedia or Priceline who offers car insurance specially designed for car hires. This type of insurance is called excess protection insurance. For example, you can buy a collision coverage insurance from Expedia at $10 per day for your rented car. If you meet any accident, the coverage will be provided by a third-party insurance company such as Allianz. You can pay for the insurance with your car rental booking fee or you can buy it independently through online sites like Bonzah.

Third-Party Insurance Benefits:

  • Third-Party Insurance comes cheaper than online booking or car rental agencies
  • You can buy it anytime, anywhere
  • You can buy annual third-party cover, so you won’t have to worry about car rental insurance for the whole year
  • If you choose to rent the car abroad, you won’t have to worry about language problems since you can make the claims when you get back home
  • You will have your insurance company to fight for you if the rental car agency charges you for something you don’t agree
  • Your excess and security deposit will be insured and won’t reduce the excess nor your deposit when you pick up the car

Third-Party Insurance Drawbacks:

  • If there is any damage, you will have to pay first and later claim the insurance company for reimbursement
  • You may not be insured for excess and security deposit paid to the car rental agency

5. Credit Cards

Some credit cards offer coverage for rental car damages as one of their perks. If you pay for your car rental using your credit card, you will have access to this benefit. Make sure that you are both the credit card holder and the person liable for the car rental booking to unlock this benefit.

Some cards provide primary coverage for any damage incurred by the rented car while majority offers second coverage. Secondary coverage means the card only pays for car damage up to a specified limit after your personal auto insurance has paid for the losses up to its full capacity. However, it is best to call the credit card customer service to know to know the extent of coverage to clear all your doubts.

Credit Card Benefits:

  • You do not have to pay any additional cost for car rental insurance
  • It can act as a back up on top of your basic car rental insurance
  • You will have your credit card insurance people to fight for you if the rental car agency charges you for something you don’t agree

Credit Card Drawbacks:

  • Not all credit cards provide car rental coverage. Plus, most credit cards offer coverage up to a limit
  • If there is any damage, you will have to pay first and later claim the insurance company for reimbursement
  • Some credit cards cover any damages related to your rental car, but it may not cover for fees claimed by car rental companies for their losses
  • Some credit cards only allow coverage for a time period, say the first 2 weeks or first month of your rental
  • Some credit cards do not allow trucks or luxury cars like SUVs in their insurance coverage. So, you have to make sure that you rent the car which is claimable under your credit card
  • You may not be insured for excess and security deposit paid to the car rental agency

6. Travel Insurance

When you make your travel plans, check whether your travel insurance provides car rental insurance. Some travel agencies provide primary coverage for your rental car while other provide secondary coverage much like credit cards. Some travel agencies offer this benefit as an optional service at an add-on cost.

Basically, it will cover for your damaged or stolen car and pay for cost of repairs or any additional charges imposed by the car rental agency. It is very similar to Collision Damage Waiver offered by the car rental agencies. You can call your travel agent to know more about this in detail.

Travel Insurance Benefits:

  • You do not have to pay any additional cost for car rental insurance
  • Even if it is offered as optional service, the price of travel agency’s car rental insurance is cheaper than that of car rental agencies
  • It can act as a backup on top of your basic car rental insurance
  • You will have your insurance company to fight for you if the rental car agency charges you for something you don’t agree

Travel Insurance Drawbacks:

  • Not all travel agencies provide car rental coverage
  • If there is any damage, you will have to pay first and later claim the insurance company for reimbursement
  • You may not be insured for excess and security deposit paid to the car rental agency
  • You may not be insured for excess and security deposit paid to the car rental agency

Insurance Checklist

As you can see, there are many ways to purchase a car rental insurance but what’s important is what you would like to include in yours! We have prepared a checklist for you here, Tick the boxes for the benefits you wish to have in your car rental insurance.

This checklist will help you to decide what type of car rental insurance you would like to choose before moving to the way of buying them.

  • Covers damage to the engine, tyres, wheels, roof, undercarriage, windows and mirrors – provided by CDW
  • Covers towing costs and roadside assistance – provided by CDW
  • Cover your luggage and other personal items – provided by EPC
  • Covers for your stolen or vandalized car – provided by CDW
  • Covers for your medical expenses sustained in the injury – provided by PAI
  • Covers for third-party injury – provided by Third-Party Insurance
  • Covers for third party vehicles and properties – provided by Third-Party Insurance
  • Covers car repair services – provided by CDW
  • Covers rental company admin fees – provided by CDW
  • Covers for rental company loss claim – provided by CDW

Types of Car Rental Insurance Comparison Table

Now that you have determined what you need, this table will help you to choose the right option to purchase rental car insurance. All these options offer CDW, PAI, EPC & Third-party insurance. So, the table gives you some important factors to determine which way is best for you to buy car rental insurance.

Before you look at the table, here’s a brief on what each column means for you:

  • Price – Look at this column if your buying decision purely depends on Price
  • Excess Protected – This column shows you whether the Options insures you against excess.
    *If Yes, your excess is insured

    • If No, you will have to pay an excess before your damage claim is covered by the insurance company
  • Deposit Reduced – This column shows which insurance options will use your deposit money as a deductible to cover your damage before paying your claims.
    • If Yes, then your deposit money can be reduced to zero before your insurer pays for the damage
    • If No, then your deposit money will not be affected in case of any damage claim.
  • Pay First, then Claim Money Back –
    • If Yes, then you will have to pay for your damages and then later claim the insurer for reimbursement
    • If No, then you don’t have to pay a penny from your pocket. The insurer will spend money and pay for your damage first hand.
  • Separate Insurer to Assist
    • Yes – means the car rental agency is also your insurer
    • No – means you are insured by a separate insurance company to settle your claims

Depending on your dominant deciding factor, you can use the table to choose the best way to purchase your insurance.

Options Price Excess Protected? Deposit Reduced? Pay First then claim back? Separate insurer to assist?
Car Rental Agency Most expensive option No Yes No No
Insure Online More expensive than third-party, cheaper than car rental agencies Yes No Yes Yes
Third-Party Insurer Cheaper than both car rental agency and online booking Yes No Yes Yes
Personal Auto Insurance Little or no cost Depends on the policy terms and conditions No Yes Yes
Credit Cards No additional cost up to a certain limit Usually no No Yes Yes
Travel Insurance Little or no cost Usually no No Yes Yes

What to Avoid When Buying Car Rental Insurance

Despite knowing what you need from your car rental insurance, you have to know what you are getting into and how much you should be charged for it. Avoid the following instances to obtain an affordable and worthy car rental insurance.

Avoid Excessive Coverage

Having car rental coverage is important but excess car rental insurance is just adding extra cost without serving any purpose. For example, if you have a comprehensive healthcare insurance, you do not need to purchase Personal Accident Insurance (PAI) to cover your medical bills. Or if you have a Homeowner’s insurance, which covers for stolen belongings wherever you take them, even if they’re stolen from a rental car then buying Personal Effect Coverage (EPC) will be an excess.

Avoid Misunderstanding Benefits Offered

Say you booked a car from Avis Car Rental Agency. You also paid for Collision Damage Waiver (CDW) along with your booking. You will expect Avis to pay for your damage if there is an accident, but some agencies will only cover your damages if there is a police report confirming that you were not liable for the accident.

However, if you were responsible for the accident, then you will have to pay the total damage cost for the rented car. This means not only are you paying for CDW, but you will be forced by the car rental agency to pay for the damage as well if the accident was a result of your own mistake.


Tips After Purchasing Car Insurance

Now that you know the Dos and Don’ts of car rental insurance, what is the next step? Often, even if you have everything you need, you may feel lost during such moment of crisis. So, here’s a few tips for you.

Be Prepared!

Make sure your insurance identification card is in the car. Double-check that phone numbers for your insurance company and agent are listed on the identification card. If not, make note of these numbers to keep with your ID card and bring it with you.

Take the Following Actions if You Meet an Accident

  • Record the name, address and phone number of the other driver
  • Always write down the make, model and license plate number of all vehicles involved
  • Collect the names, addresses and phone numbers of all passengers and witnesses
  • If possible, take photos of the accident scene, it can be helpful to claim insurance and to avoid being overcharged by the car rental agency
  • Make a police report on the spot to notify about the incidence so, that police hear your story first hand before anyone else
  • Notify your insurance agent or company immediately to get your insurance claim in motion

Conclusion

This article provides everything you need to know about car rental policy – the variable options you can choose to buy the insurance, what types of car rental insurance you want, what coverages are available in the market, how to assess your needs and how to act in crisis. You are now ready to rent a car and make an informed choice. Be extra sure to select a car rental insurance that is both affordable and have reasonably sufficient benefits.