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Do I Need Rental Car Insurance?

August 27, 2019 by Steven M. Gursten

Rental Car Insurance 101: Should I Buy It, Is It Worth It? | Michigan Auto Law

Do I need rental car insurance? That’s the question that haunts so many of us as we stand at the rental car counter. 

For most people, what follows is that moment where we stand there, completely clueless, on whether you need rental car insurance or if it is complete a rip-off.  We wonder if our own collision insurance will cover a rental car. We look back at the rental agent at the counter, and we say yes or no but without really knowing why or if it is worth it and if it is something you’ll need if you get into a car accident while driving a rental car on vacation or for work.

And after we make that decision, there’s that uncomfortable feeling we have in our stomach wondering what could happen to us if we don’t get it, and we end up in a fender-bender or a fender-bender that racks up a lot of damage to the rental car.

As an accident attorney, I’ve received my share of frantic texts from friends and family standing at rental counters asking me to quickly answer their questions “do i need rental car insurance?” and “is it worth it?” Today, I’m going to give you my advice on buying insurance when you’re renting cars.

What are the car insurance coverage options for renters?

To determine if you need rental car insurance we must first review the car insurance coverage options available to renters. There are four types of car insurance coverage options that renters can purchase from a rental company:

  • Loss damage waiver/collision damage waiver: This means that if you’re involved in a crash which results in damage to the rental car, then the rental car company will not hold you liable to pay the damage repair costs. In other words, in return for the renter’s purchase of this coverage, the rental car company will waive its right to sue the renter for any damage to the vehicle that occurred during the rental period. This coverage also protects the renter from liability in the event the rental vehicle is stolen.
  • Supplemental liability protection: This coverage will pay for any damage to other vehicles or property that you cause while driving the rental car. Rental car companies regularly offer this coverage with a $1 million limit.
  • Personal effects coverage: If your personal effects are stolen from the rental car, this coverage will reimburse you and/or cover replacement costs.
  • Personal accident insurance: This type of  insurance covers medical costs for the renter and any passengers in the rental car should the vehicle be involved in a car crash.

Should I buy it?

If you are standing at the rental counter and you are wondering if you need rental car insurance, then the short answer is yes, you should buy it.

At worst, purchasing this insurance adds a few extra dollars to your rental car bill.

However, this decision will likely save most people tens of thousands of dollars – and perhaps much more – if tragedy strikes and you’re involved in a crash while driving your rental car.

Even if you have an insurance policy and collision coverage of your own, I still advise people that they need rental car insurance and to buy it. The reason is that without reading the policy language and the exclusions in the policy to see if it will cover paying for vehicle damage of a rental car, getting it just makes sense when you have to make a quick decision compared to the risk of thousands of dollars of liability that you will personally bear if you decide against it.  

To determine if you need rental car insurance, the best thing to do is to take time before your trip or vacation and contact your insurance agent and get something in writing that the rental car is covered by your current auto insurance policy (many will not) and collision coverage (many will have policy exclusions for rental cars). Just make sure you get it in writing beforehand.

Is it worth it?

Yes, it is worth it. Though you may not think you need rental car insurance, it’s a cheap way to get invaluable peace of mind and extensive protection for you and your family and your finances should you be involved in a crash with your rental car.

Do I need rental car insurance?

Do I need rental car insurance? That’s the big question for a lot of people when they’re renting cars. They already have No-Fault coverage and collision coverage on their personal vehicle and their family vehicles and they’re questioning whether they need rental car insurance or whether their personal coverage will carry over. 

In light of the four types of car insurance coverage options available for renters, here are the things I ask people to keep in mind when they ask me “do i need rental car insurance?”: 

  • Loss or collision damage waiver: If you have collision and comprehensive coverage on your personal vehicles, then it will most likely transfer to a car that you are renting. You must confirm this with your agent ahead of time. Alternatively, if you want to avoid the hassle and likely increase in your collision premiums by making a claim through their own insurance, then you should purchase the rental company’s insurance coverage, i.e., the loss or collision damage waiver. That way, you can just turn the car in when you are done and walk away. In the event that you do not have collision or comprehensive on your own personal vehicle’s policy, then you should purchase the loss/collision damage waiver, otherwise you will be personally liable to pay for any damage to the rental car.
  • Loss of use and diminished value: Even if your personal collision and comprehensive coverage will cover accident-related damage to a rental car, your personal auto insurer will likely not cover these two very expensive and little-known charges. If your rental car is damaged in a crash, then the rental company will be looking for you to help with paying not only the damage repair costs, but also the costs the company incurs from “loss of use” of its rental car while it’s being repaired and the “diminished value” of its rental vehicle as a result of having been damaged and repaired. These costs can add up quickly and significantly. By purchasing the loss/collision damage waiver, a renter can protect himself or herself from being held liable for these costs.
  • Supplemental liability insurance: Although liability coverage in most personal auto insurance policies will cover liability stemming from an at-fault crash involving a rental car, this type of  insurance coverage can significantly boost your protection because the rental company liability limit is usually in the neighborhood of $1 million, which is considerably more than what Michigan requires drivers to carry.
  • Personal effects coverage: Although a renter’s homeowners or renters insurance policy will likely cover the theft of one’s belongings from a rental car, this coverage has the benefit of allowing a renter to seek reimbursement without having to file a claim with his or her insurer and, thus, risk having his or her premiums increased.
  • Personal accident insurance: For Michigan drivers, this is the coverage that they will want to deliberate over the most. Under No-Fault auto insurance policies effective through July 1, 2020, all Michigan drivers have unlimited No-Fault PIP medical benefits to cover accident-related medical expenses as well as lost wages. After July 1, 2020, when the new No-Fault PIP medical benefits coverage levels become available, that will change because “unlimited” coverage will no longer be required. As such, when deciding whether and how much personal accident insurance to purchase from a rental car company, Michigan drivers will have to weigh the benefits available through the rental company against the benefits through their own No-Fault auto insurance policy.

Do I need rental car insurance if I’m using a credit card to rent?

Maybe not. Many credit card companies automatically provide insurance coverage if their customers use their credit card to rent a car. To be sure if you need rental car insurance, you must confirm the existence and details of this coverage before you show up at the rental car counter. In order to know if you need rental car insurance if you are using a credit car to rent, here are the issues you will need to address with your credit card company:

  • Does the credit card company provide primary or secondary coverage? In other words, will the credit card company’s insurance coverage kick in immediately or only after its cardholder’s personal auto insurance has been exhausted?
  • What requirements must be met for the credit card company’s  insurance to take effect, e.g., the rental car was paid for with the credit card?
  • What is covered by the credit card company? It’s not unusual for the credit card coverage to apply to the loss/collision damage waiver.
  • What isn’t covered by the credit company? For example, you will want to know if liability, medical expenses and reimbursement for damaged or stolen belongings are covered by the credit card company’s insurance policy for renting cars.

Do you have to have insurance to rent a car?

No. In fact, renters who don’t have their own car insurance are probably the people who inspired rental car companies to offer insurance in the first place.

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