Should I Purchase the Coverage offered by the Rental Car Company?
Purchasing a Collision Damage Waiver on Your Rental Car Can Make Sense
Although the fees can be considerable, it may be a good idea to purchase a collision damage waiver the next time you rent a car. You may believe you have enough protection from your Personal Auto Policy (PAP); however, that's just not the case.
Gaps in Coverage
Your PAP typically covers the lesser of the actual cash value of the car or the minimum amount to repair or replace it. Your contract with the rental car company may require you to reimburse them for the full value of the vehicle in which case you would have to make up the difference out-of-pocket. The PAP also does not pay for any increased value of new parts replacing old ones, or any diminution of value, meaning if the market value of the vehicle after repairs is less than that before the accident, you would have to make up the shortfall.
Another area where the waiver can be of great importance is in the settlement process. Your insurance company has the right to inspect and appraise the damaged car before repair or disposal. However, the rental company is not bound by the terms of your policy, and it may opt to complete the repairs immediately. This would possibly result in your not being covered because you didn't comply with the terms of the policy.
Immediate Reimbursement for Damages
Additionally, the rental agreement may require immediate reimbursement for damages. Without the waiver, they could put these charges on your credit card which can create unexpected cash flow issues.
Rental agreements often make the renter responsible for any loss in value beyond normal wear and tear, regardless of the cause or who's at fault. Your PAP doesn’t cover this contingency unless you insure at least one vehicle for both collision and other-than-collision coverage.
Loss of Use
You could also be responsible for the rental company’s loss of income on the damaged car. Your policy has limited coverage for these charges. The same is true for any administrative or loss-related expenses such as towing, appraisal, claims adjustment, and storage fees you may be charged.
Confusion as to who pays
Another issue to consider is that your PAP is considered excess coverage if any coverage is provided by the owner of the auto or there is any other applicable physical damage insurance; or there is any other source of recovery applicable to the loss, such as travel policies, credit card coverage, etc. This can create a controversy over who pays, which can result in messy litigation.
If you have additional questions or would like a coverage review, get in touch with Chris Baumli, CIC at cbaumli@sbcia.com or call 512-338-0100 and ask to speak to one of our licensed counselors.
Labels: Austin, Auto, Car Insurance, Rental
