By Megan Renart
Maybe you’re signing the paperwork for a rental car, ready to zip up the West Coast for a week in the sunshine, when the agent asks if you’re also going to be adding rental insurance.
You pause. The agent starts talking about liability, and you see dollar signs piling up. You ask yourself: “Do I really need rental car insurance?”
“Whether it comes down to your personal auto coverage or purchasing coverage from the rental company is a personal choice,” says Sean Scaturro, Director of Insurance Advice and CERTIFIED FINANCIAL PLANNER™ practitioner for USAA.
The truth is there is no clear-cut answer when it comes to purchasing insurance for your rental car, so it’s easy to understand why you’re hemming and hawing.
Most personal auto insurance policies have coverage that will transfer to the rental car, so technically, you’re covered while driving the rental. The choice is whether or not you want to use the rental company coverage for their car so you don’t have to use your own policy.
If your insurance is covering the car, then your deductible comes with it. So if you’re liable for a fender bender while driving a rental car that causes $4,500 of damage, and your deductible is $1,000, you must fork over that amount — all for a car you don’t own.
The coverage offered by the rental car company is generally much more expensive than your personal auto policy coverage, so if you don’t get into any incidents while driving, you may have opted for an unnecessary expense.
“Knowing that your wallet is protected against something that happens when you’re in a rental car is a good feeling,” Scaturro says. “Consider if the value provided by the extra coverage is worth the expense.”
“Major credit card companies may offer rental car coverage if you use their credit card to rent the car,” Scaturro says. “It is important to understand the coverage limitations and exclusions for how coverage applies, for example, it may cover things like towing, theft or damage to the car but may have limitations on how you are covered for damage that you cause.”
In short, credit cards don’t offer liability coverage while you’re driving the rental. Some do, but most don’t.
“Relying solely on your credit card rental car coverage may not offer adequate liability protection for your financial situation,” Scaturro says.
If you’re traveling for work, your company may pick up the tab for the rental and the insurance from the rental agency — score! In other instances, larger corporations may choose to cover the liability without paying for the insurance from the rental agency. It’s best to check your company’s policy toward the rental insurance before standing in the rental car line at the airport to be prepared.
Sean Scaturro is the Director of Insurance Advice for USAA and a CERTIFIED FINANCIAL PLANNER™ practitioner. With more than 15 years of experience in the financial services and insurance industry, Sean has a wealth of knowledge advising clients on risk management, asset allocation, retirement planning, portfolio construction and estate planning.
Alliance services provided through USAA Alliance Services, LLC, which contracts with third parties that are not affiliated with USAA to provide products and services to USAA members and receives compensation on the sale of third party products and services. Third party providers have sole financial responsibility for their products and services.
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