Is it a good idea to purchase insurance from a rental car company?

You and your family are taking a trip to the Grand Canyon. Instead of using the family car, you decide to rent a minivan. The woman at the car rental establishment asks if you want to purchase optional insurance coverage for the time you have the minivan.

You hesitate.  Is it a good idea to purchase insurance from a rental car company?  You decide to prevent any aggravation and sign up for the insurance.

The cost of optional insurance for the rental vehicle is about $20 a day. The extra cost of insurance is about $140 for the seven-day trip.

Purchasing rental car insurance is worthwhile. Here’s why:

  • In some states, automobile insurance policies don’t pay for the rental car company’s loss of use, i.e., the loss of rental fees by the company when the car is in the shop for repairs. Without the optional insurance you will have to pay these fees.
  • If you take along digital cameras, laptop computers, iPods, iPads and other expensive electronic devices on your vacation, the cost to replace these items if they are stolen or damaged in an accident, can be considerable. If you have increased your deductibles on your homeowners or automobile insurance, your loss must be in excess of the higher deductible in order to be covered.
  • If you don’t have the optional insurance coverage and you file a claim on your personal automobile insurance policy for an accident you have with a rental car, your current automobile insurance company may mark you as a high risk driver. Your automobile insurance premiums will increase.
  • The rental car company may demand a payment for “diminished value” because they must now disclose, when they sell the car, that it was in an accident. This lowers the resale value of the car. Many automobile insurance companies will not pay this so it will come out of your pocket.

When Alice and her husband rented a vehicle to travel out-of-state to visit her parents, a restaurant valet damaged their rental car. Alice did not purchase the optional insurance coverage for the rental. She had to deal with her automobile insurance company and her credit card company. Alice also had to pay for the $1,000 in damages to the vehicle before she was allowed to leave the rental car agency’s office.

Frank rented a vehicle when he visited St. Thomas, U. S. Virgin Islands. He was involved in a fender bender that caused damages to the rental vehicle which he had obtained through the hotel. The rental company charged $800 until the actual damage could be fully assessed by billing the hotel. The hotel disputed the amount. Five months later, the hotel reimbursed Frank for the $800 he was charged by the hotel.

“The bottom line is that I recommend you purchase the optional insurance from a rental car company,” said Tod E. Aronson, president of E. R. Munro and Company, Pittsburgh, Pa. “If you have an accident in your rental car, you can literally walk away with no extra cost, no dealing with your personal automobile insurance company or the rental company. Is $20 a day too much to pay to eliminate potential insurance aggravations while you’re on vacation?”

To learn more about automobile insurance coverage, contact E. R. Munro and Company at 1-877-376-8676 or visit our Web site at www.ermunro.com.