Understanding Your Car Insurance Options at the Rental Counter
On vacation, on a business trip or even moving your freshman to college - deciding whether to buy rental car insurance is complicated. As the rental car agent hovers over the contract with a pen, you have to make the decision in a split second!
So, how do you know if the car insurance rates you pay on your current policy will cover your rental car? Although this step-by-step guide can help you avoid a costly mistake, your insurance company may have special rules, so be sure to ask about the coverage available on your own policy. From determining if auto insurance companies will provide coverage for your rental to insurance for traveling abroad, use these five simple steps to avoid a costly mistake:
Step 1. Determine whether your own policy will cover your rental car
Most auto insurance companies will extend the coverage on your personal auto policy to a rental car. The important fact is whether you have bought comprehensive and collision coverage on your own car. That's the coverage that pays for damages like scratches, dents and thefts. If you have this coverage on your own policy, it will transfer to a rental. Call your auto insurance company to check - but before you do, keep reading.
Step 2. Find out if your credit card company will cover damage to the car
Many credit cards will pay for damage to a rental car when you pay with that card, but the coverage will be secondary to your own policy if you have one. Your card also may pay for towing - but will never pay for damage or injury that you cause to another car or driver. That's covered by liability or personal injury protection - which is why having your own policy is so important.
Step 3. Decide whether you're traveling for business or pleasure
Many employers have corporate coverage for employees who rent cars, so don't buy the extra coverage unless you've checked with your boss or the fleet department first. When you travel for pleasure, your rental car is considered a temporary substitute for the car you've left at home - and that's why the policy you have with your own auto insurance company may provide coverage.
Step 4. Be cautious if you're leaving the state - or the country
In the United States, insurance laws are different in every state. Policies in some states like Massachusetts may only cover travel within the state. But, in most states, you're covered as long as you drive in the U.S. However, many policies may limit coverage if you travel to Canada and few will cover travel to Mexico. If you're traveling abroad, most travel guides recommend buying the coverage with the rental car, because it's too complicated to deal with insurance in another country.
Step 5. Don't let a stranger drive your rental car
Or your best friend, boyfriend or teenage daughter. Rental car companies are picky about who drives their car and any coverage you have on your policy from your own auto insurance company (or the rental car policy) may not cover another driver - unless they are listed on the rental contract.
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Originally posted September 17, 2004.