Thursday, August 19, 2010

How It Works: Rental Car Coverage, Part 1

In my last blog installment, I mentioned that there are basically six options one would have at the Hertz counter at some airport after flying in. None of these are an easy choice. The first option (refer to the first blog) is to buy the Rental Car Coverage offered to you. Let’s explore this option which is usually the best option as well as the most expensive. It is another travel charge beyond just renting the car that may come in at anywhere from $15 to $40 more per day. The cost varies greatly from city to city or country to country and among the different car rental agencies as well as the type of car you’re wanting to rent. Another factor is the deductible you choose.

So, first you will want to enjoy reading their contract. Yes, the rental agreement is a contract. Each rental car company has their own contract which will differ. There is no uniformity even with the “Big 3” which are Hertz, Avis and National. As with all contracts one could be at a serious disadvantage if you fail to read it. Take a few moments and read it carefully. Find out what you’re about to be obligated to.

Still there are some similarities when it comes to the liability and the physical damage to the car itself. For liability none of the car companies will provide any more liability than they have to. In other words they will meet each different State’s minimum requirements for bodily injury and property damage which in most states is 25/50/25. For now that is what it is in Oklahoma. But if you’re traveling you are most likely out of State. So, ask about this. Yet, in most instances the rental companies have made their liability insurance excess coverage. Doing this makes your insurance primary coverage or the insurance that will respond and pay first. Ask the rental company if they will increase these limits for an additional charge. The Big 3 will usually go up to a $1,000,000 combined single limit of liability for bodily injury and/or property damage. Then ask them if you buy the higher limits will they make their insurance primary? You can expect to pay another additional cost to do this.

What most folks think of when they ask about the rental insurance is damage to car itself. We call this physical damage but it includes more than things like fire or theft or a wreck. You’ll get “full dollar protection” for the rental including the loss of use, claim expenses, attorney fees, “administrative expenses”, towing and labor, diminution of value (a new one costs more than an old one), etc. This is “Collision Damage Waiver”. This is what they want to sell you. This is what most people buy. You buy it and you have “peace of mind” and for $40 to $50 per day or $280 to $350 per week you have no need to worry, right?

Not so fast, nomad. You did read the contract didn’t you? Did you read the part about “Prohibited Uses of the Vehicle”? The Big 3 usually have some variation of the following six “Conditions” or “Prohibitions” that will nullify their coverage. If you violate any one of these Conditions the rental agreement coverage will not pay. Even though sometimes there are more than these six (please read your contract carefully looking for these) we will deal with only the following six:

First, the vehicle will be used only by authorized drivers. If you’ve signed the rental agreement then you are an authorized driver. Anyone else must be listed. It may cost $6-8 per person per day. So, only one other driver at $8 per day for 5 days is $40. You can play this out with more drivers if you wish, but keep in mind that if this person is not listed then they cannot drive.

To be continued...

--Steve Whitten

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