July 26, 2016

6 Things to Know About Rental Cars and Insurance

Despite the growing popularity of ride-sharing services such as Uber and Lyft, demand for rental cars continues to increase. Although there are many different situations in which you may need to rent a vehicle, the two most common are as a replacement for your primary vehicle after an accident or a means of transportation when you’re traveling.

Understanding how your insurance applies in each of these situations can prepare you for the unexpected and help you to maintain your peace of mind, whether you need a vehicle in the aftermath of an accident or for sightseeing while on vacation.

Transportation Expense Coverage: When You Need a Rental Car After an Accident

Unfortunately, you can’t put your life on hold after a car accident. You still have responsibilities that require a car, like going to work, running errands and keeping scheduled appointments. With a rental car, you are able to get these things done while your car is out of commission. That’s why it’s so important to understand your auto policy’s Transportation Expense (or Rental Reimbursement) Coverage. It helps pay for the cost of a rental car while your vehicle is in the shop due to a covered loss.

1. Do I have Transportation Expense coverage?

Generally, if you have auto insurance, you have some combination of comprehensive and collision coverage. Collision coverage pays for damage to your vehicle caused by contact with another object, such as another car or structure. Comprehensive coverage pays for non-collision-related damage to your vehicle caused by events such as theft, glass breakage or fire.

What your Transportation Expense Coverage will cover depends on whether you have collision coverage, comprehensive coverage or both. If you carry both comprehensive and collision coverage on your vehicle, your Transportation Expense Coverage will pay (at least in part) for a rental vehicle needed after a comprehensive or a collision loss. However, if you only carry comprehensive coverage, your Transportation Expense coverage will kick in for a comprehensive loss (e.g., your car is stolen) but not for a collision loss (e.g., your parked car is hit).

2. Will my rental reimbursement cover the full cost of a rental car?

How much Transportation Expense Coverage you have influences the type of rental vehicle you can select without incurring out-of-pocket expenses. For example, even if you drive an SUV, that doesn’t mean your rental coverage will pay for a replacement SUV. Depending on your coverage, you may only have enough coverage for a compact car. This could make it difficult to carry on with your normal activities while you wait on your repairs. For example, imagine if you had to squeeze yourself, your spouse, three kids, and two pets in a compact car for more than a week.

Even if you can get by with a compact, your auto policy may not cover its full cost. In many auto policies, the base coverage for rental car expenses in the event of a covered loss is $20 a day. However, the average compact rental costs more than $30 a day. This means that you could face out-of-pocket expenses to cover the additional costs when renting a vehicle after an accident. If you’d like to avoid this type of out-of-pocket expense, consider adjusting your coverage.

Click on this chart to see how much the average rental car costs by major metropolitan city:

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3. How do I adjust my coverage?

Adjusting your Transportation Expense coverage is easy. It can reduce or eliminate your out-of-pocket expenses, as well as give you the flexibility to choose a vehicle that suits your lifestyle. For Hartford customers, you can log in to The Hartford’s Online Service Center to:

  • Estimate the cost to add Optional Transportation coverage.
  • Decide whether the additional coverage best meets your needs.
  • Submit a change to increase your coverage for rental car expenses.

Collision Damage Waiver: When You Need a Rental Car on Vacation

The warmth of the sunshine on your skin, the breeze as it blows through your hair, your grandchild’s exuberant laughter. These are the moments you want to remember about your vacation. Then you have those moments of indecision at the rental car counter, when you think to yourself, “What does my auto insurance cover? Do I need the coverage offered by the rental counter?”

4. Am I covered by my auto policy when I rent a car on vacation?

Whether the rental car you are driving on vacation is covered by your car insurance policy depends on two key questions: “What type of car insurance coverages are included on your policy?” and “Where are you going on vacation?”

In most cases, you’ll need collision coverage–for damage to your vehicle caused by contact with another object–on at least one vehicle on your policy. Also, typically, you’ll need to be traveling within the United States, its territories, Puerto Rico or Canada to qualify for rental coverage through your auto policy.

If you meet both of these conditions, comprehensive and collision coverages may be extended to your rental vehicle subject to your deductible. If you have multiple vehicles on your policy with different deductibles, the lower deductible usually applies. Check with your insurance professional to understand your specific policy coverages.

5. Should I reject the waiver at the rental counter?

It may make sense to reject the Collision Damage Waiver (CDW) offered at the rental car counter if you already have coverage. But before you do, you’ll want to be aware of a few additional details.

Even though damage to your rental car may be covered under your auto policy, the rental car company may require payment for those damages at the time you return the vehicle. You should consider whether you can afford such a payment, even in the short term, before you reject the waiver. Ask the rental agent for more details as you may have to pay from $1,000 to the full value of the car if it is damaged.

If you don’t have collision coverage on your auto policy, purchasing the collision damage waiver is strongly recommended. You wouldn’t want to risk having to pay for a new rental vehicle if the one you’re driving is destroyed in an accident.

If you’re planning to rent a vehicle while traveling abroad, you can contact the U.S. consulate in advance regarding the particulars of renting a car in the country you’re planning to visit. You can also ask the rental car company about coverage options.

6. What does suspending collision coverage on my personal vehicle have to do with my rental car?

If you’re planning to take an extended trip or vacation—more than 30 days—and you’re not taking your vehicle with you, you can suspend collision coverage on that vehicle. After all, you’re not driving it and comprehensive coverage will cover non-collision-related damage.

But, let’s say you rent a car while on vacation and end up having an accident. Because you suspended your collision coverage, it would no longer extend to your rental car. This means that you would be financially responsible for the damage to your rental car. Depending on the extent of the damage, you might find yourself buying the rental company a brand new car. Therefore, if you’re planning to suspend your collision coverage on your owned vehicle, it is strongly recommended that you purchase the CDW at the rental counter.

Insurance, as it relates to rental cars, can be complicated. If you have questions, reach out to your agent or insurance carrier for more details.

Disclaimer: This material is for informational use only. The coverages described above are specific to The Hartford. Other carriers’ offerings may vary. Speak with your agent or insurer for more detail on your specific policy.

Keep Reading: Why Complex Cars Cost More to Repair

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