Will my auto insurance policy cover a rental car?

First, if you are renting a vehicle that is larger than a pickup truck, the answer is probably not.  You also need to be inside the United States or Canada to expect any coverage.  If you rent a car in your own personal name, and then use it for business purposes, any coverage from your personal auto insurance policy may be voided.

Whatever coverages you have on your own personal auto insurance policy will transfer to the rental car.  Available coverages vary by state, but typically the main concerns are liability coverage (damage to someone else or someone else’s property/car), collision coverage (your car collides with something), and comprehensive coverage (damage to the vehicle that is anything other than a collision).  Your deductibles will apply.

Often, rental car companies attempt to hold people accountable for the “loss of use” of the vehicle.  For example, “We rent the car out at $30 a day, and because of your accident, it was in the shop for 10 days.  Therefore, you owe us $300 of lost revenue.”  If you have extended transportation expense or rental car reimbursement coverage on your personal auto policy, it will generally pay for this.

There is one important area in which your own auto insurance policy will not protect you:  Reduction in the car’s value.  For example, a car’s market value is reduced by $2,000 because it has been involved in an accident.  For better or worse, we do not hold one another accountable for this loss in the US system.  Therefore, your personal auto insurance policy does not address this risk.  However when you rent a car, you usually agree to become liable for this.  Your own auto insurance policy will not help you, but if you purchase their insurance (referred to as “collision or loss damage waiver”), it will typically cover this for you.  The question that you must ask yourself is, “Is the exposure to potentially having to pay for the loss of market value of a car worth $25 a day?”

Every insurance carrier is different, and it is important that you ask your insurance agent exactly how your auto insurance company handles the transfer of coverage to a rental car.

Posted on: August 10th, 2012 at 9:24pm by garyt. Filed under: Uncategorized
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