Q: Do you need rental insurance if you already have car insurance?
I use a rental car three or four times a year. They always ask me if I want to buy insurance through them at the time of rental, and I always say no because I have my own car insurance policy. But in the back of my mind, I always wonder whether I’m making a wise decision. I mean, does my car insurance provide me with enough coverage?
A: The answer to this question is not as cut-and-dry as most people might thing. The right answer will vary from person to person and depends on what your current auto insurance policy actually covers, as well as how much you can afford to lose in the event of an accident. Let me explain.
The insurance offered by rental car companies is threefold. You can purchase liability coverage, medical payments coverage and/or a Loss Damage Waiver. You can choose to purchase one, two or all three of these coverage types. So should you?
• Liability coverage: This provides coverage for any damage or injuries you cause to a third party if you are responsible for an accident. If you have your own car insurance policy, you already have liability coverage, so you will not need to purchase this coverage. Those who do not have a current auto insurance policy will be required to purchase this coverage before they can rent the car.
• Medical payments coverage: This is designed to cover medical expenses incurred by you or your passengers if you are injured in a car accident. If your car insurance policy already includes this coverage, you do not need it. Otherwise, the decision to purchase or not purchase it is a personal one.
• Loss Damage Waiver: When purchased, this waiver states that the car rental company will not hold your responsible for damages to the car as long as you have not used it in a way that violates the terms of your rental agreement (e.g. by driving recklessly, off-road, or while intoxicated). If your car insurance includes collision coverage and other-than-collision coverage (also referred to as comprehensive coverage), you already have a measure of protection. However, you still risk a large financial loss because of your insurance policy deductible and added fees by the rental car company for loss of use, diminished value and administrative costs.
So, should you purchase the Loss Damage Waiver? If you do not carry collision or other-than-collision coverage, I’d highly recommend it. If you do have this coverage, well, it’s up to you.